Downstream Demand Urges ABS Resin Industry to Expand Capacity
Click:0    DateTime:Dec.24,2021

Gao Liping, CNCIC

ABS resin consumption analysis

China’s CAGR of ABS resin consumption from 2010 to 2019 was 4.3%, with 0.8% from 2010 to 2015 and 8.6% from 2015 to 2019. The consumption in 2019 grew steadily to 6.05 million tons.

China’s ABS resin consumption structure in 2019: home appliances and electronic products 60%, light industrial products 11%, transportation 10%, office equipment 9%, construction materials and others 10%. 

Home appliances (both large and small) and electronic products account for 60% of total ABS consumption, with home appliances taking the lion’s share. ABS resins are mainly applied to white appliances (namely air conditioners, refrigerators and washing machines) and small home appliances, including microwave ovens, rice cookers, food processors, dishwashers, disinfection cabinets, water dispensers, water purifiers, robot vacuums, vacuum cleaners, stereos, bread machines, coffee makers, toasters, hair dryers and electric razors. The demand for ABS resin from small home appliances has been going up lately. China is the world's largest producer and consumer of home appliances. In 2019, China’s output of refrigerators and washing machines accounted for more than 50% of the world total, and that of air conditioners and microwave ovens 75%. The export value of home appliances took 37% of the global exports, with that of large appliances accounting for 31% and that of small appliances 45%. In 2019, China's air conditioner output reached 218.662 million units, up 6.7% YoY; refrigerator output 79.043 million units, down 1.1% YoY; washing machine output 74.33 million units, up 3.9% YoY.

In the transportation sector, ABS is mainly applied to vehicle components such as instrument panels, tire covers, radiator grilles, air conditioners, trunks, handles, interior trim panels, steering wheels, sound insulation panels, door locks and ventilation ducts. ABS resins are also applied to motorcycles, game cars, boats, and snowmobiles. China had a total automobile production of 25.721 million in 2019. However, its consumption of ABS fell to 10% in percentage, in contrast to the consumption increase from home appliances. Meanwhile, the development of new energy vehicles contributed to the growth of ABS resin consumption in the automobile sector.

ABS resins, in the light industry field, are mainly used in the production of bags, toys and lighters. China is a big producer and exporter of toys and bags, and electronic game consoles, toy musical instruments and toy models all have huge demand for ABS resins. 

Computers, office automation equipment and communication equipment also largely consume ABS resins, mainly by products like computers, fax machines, copiers, printers, telephones, and routers.

Thanks to its excellent performance, ABS resins are also popular in construction materials, mechanical materials, medical devices and alloy compounds. In construction materials, ABS resins are mainly applied to pipes and decorative panels, with the former including water supply pipes, drainpipes and low-foam pipes, and the latter including office buildings, hotels, bash rooms, swimming pools, door frames and window frames. New consumers include yachts and mobile homes. 

The growth of demand for ABS is decided by the downstream development as well as the prices and performances of its substitute HIPS. Generally, China’s ABS resin demand is expected to grow at 3%-5% annually in the next five years. 

ABS resin supply analysis

China’s ABS resin capacity and output in 2019 were respectively 4.2 million t/a and 4.05 million tons, and the industrial operating rate averaged at 96%. 

From 2010 to 2019, China’s ABS capacity expanded by 5.5% annually, and the production grew by 7.8% yearly. The industrial operating rate averaged at 72% in 2015 and hit 96% in 2019. Along with the rapid growth in demand for ABS, the industry has shifted from oversupply to tightness. 

Driven by the rapidly increasing demand and higher profits, China’s ABS resin industry has seen more and more investments coming in. New ABS resin projects have been planned and started, including Zhangzhou Chimei Chemical, Sinochem International, LG Chemical, and INEOS (see Table 1 for details), with the total capacity reaching 4.4 million t/a. There are also companies intending to build ABS capacities, but some of them have not started yet due to technical barrier and/or capital shortness. Therefore, the ABS capacity in China will grow significantly, and the new production will not only meet the growing domestic demand, but also replace some imports, and even be exported.

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Conclusion 

China’s ABS resin consumption compound annual growth rate was 0.8% from 2010 to 2015 and then hit 8.6% from 2015 to 2019. In 2015, the average operating rate of the ABS resin industry was 72%, at a stage of structural surplus. However, the figure rose to 96% in 2019 thanks to the rapid growth in demand over the past five years, and the supply became relatively tight. In terms of import and export, China had 2.04 million tons of ABS resins imports and less than 40 thousand tons of exports in 2019, showing that there was a shortage in domestic supply. Stimulated by such tightness, coupled with the breakthrough of ABS resin technology by domestic companies such as PetroChina and the improvement of profit performance, a large number of companies have been attracted to build and/or expand ABS resin capacities. According to conservative estimate, China will have 2 million t/a additional ABS resin capacity during 2020 to 2025, and the ABS resin industry will face a structural surplus again by then.