In the first half of July, the domestic ABS market stabilized at a low level and then rose, with most spot prices of various grades experiencing a wide correction. As of July 14th, the average price of ABS sample products was 9916.67 yuan/ton, an increase of 14.20% from the beginning of the month.
Fundamental analysis
Supply level: As we enter July, the domestic ABS industry’s equipment load remains stable with small fluctuations, and the overall operating rate within the range is close to 60%. The current weekly average production is around 130000 tons. The inventory location of finished products has been significantly reduced to less than 210000 tons. The shipment situation of aggregation plants within the range has rebounded, and there is no expectation of a contraction in production in the short term. Overall, the support for spot prices from the ABS supply side in July is still acceptable.
Cost factor: News of the preliminary peace agreement between the United States and Iran in the Middle East in June was frequent, but the recent end of the ceasefire agreement has led to a situation of fluctuation. The risk of shipping recovery in the Strait of Hormuz has increased, and there are concerns in the market about international crude oil supply, leading to a rapid return of geopolitical premiums. Affected by it, the price of pure benzene rose strongly, driving styrene to follow suit. At the same time, the on-site inventory is steadily being digested, and the demand side is building a solid foundation.
The acrylonitrile market is the opposite, with the combination of high operating rates and weak downstream consumption suppressing spot prices. However, the rise in crude oil and propylene provided some support, and as the middle of the month approached, the market stopped falling and stabilized. However, the overall demand off-season is expected to continue until around mid August, and at the same time, the new production capacity of 660000 tons from Zhejiang Petrochemical and 130000 tons from China UK Petrochemical will also be implemented in the later stage. Oversupply in the future will continue to envelop the acrylonitrile market. In addition to external news and supply variables, acrylonitrile prices may once again fluctuate near the cost line for a long time in the future.
In the first half of July, the domestic butadiene market was consolidating and operating strongly. Shenhua Ningmei, Gulei Petrochemical and other early-stage maintenance enterprises have gradually returned, and the on-site supply of goods has been relaxed. Downstream terminal products have poor profits, and there is a shortage of inventory expansion operations. The market’s wait-and-see sentiment has intensified, with small trading orders being the main focus.
On the demand side, there were limited changes in the start of work for downstream ABS enterprises in July. The main terminal appliance industry is still in the off-season, with poor consumption levels of appliance casings and no improvement in the profitability of terminal enterprises. There has been an increase in local replenishment operations within the range, but the buyer camp has a high resistance to high priced goods, and tends to take goods as needed, resulting in fewer warehouse building operations. The willingness to chase price increases on the market is average, and merchants follow the market and withdraw funds. Overall, the short-term surge in consumption supports the ABS market, but there is a lack of large-scale forward contracts, resulting in a slight lack of momentum on the demand side.
Future forecast
After the domestic ABS market stopped falling in the first half of July, it rose. The cost and material distribution within the interval are differentiated, and the production load of the aggregation plant changes narrowly. The inventory digestion is significant, and the on-site supply still maintains a sufficient range. Over the past half month, there has been a significant increase in ABS consumption, but the situation of unit price losses has worsened. The current market has average momentum, and once the temporary demand support subsides, the upward trend may be hindered in the future.
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