How Does Abs Move After Experiencing Extreme Surge And Plunge

Witnessing history with extreme volatility and fluctuations

Data source: Golden Union Creation

In the second trading week of March, extreme market volatility—sharp surges and plunges—emerged: Monday witnessed the largest single-day gain in history, while Tuesday saw the largest single-day decline in history, prompting many ABS manufacturers and traders to suspend quotations, withdraw from buying, and significantly reduce new order transactions.

During the first weekend of March, the escalation of the US-Israel-Iran conflict led to disruptions in crude oil supply and maritime transportation in multiple countries in the Middle East. Market concerns intensified, boosting crude oil prices, with pure benzene and styrene futures hitting the daily upper limit. The spot market saw a straight rise, and on Monday, ABS petrochemical manufacturers significantly raised their prices, with high-end materials jumping to over 20,000 yuan. Most merchants withheld their prices for observation, while a few quotes soared, with the market seeing an increase of more than 3,000 yuan per ton. The prices of domestically produced mid-to-low-end materials surged to above 14,000 yuan per ton.

However, Trump stated at a press conference that the U.S. military action against Iran would "end soon." Following this, raw material prices fell sharply on Tuesday, with ABS petrochemical manufacturers making significant downward adjustments. Market profit-taking pressure led to a sharp decline in ABS trading centers, with some material profit-taking prices falling below 11,000 yuan/ton. Although crude oil closed higher on Wednesday and styrene surged again on Thursday morning, some ABS manufacturers raised their prices accordingly, leading to a reduction in low-price deals and a slight price increase. However, styrene fell sharply again in the afternoon on Thursday, causing the ABS market to return to weakness, and prompting traders to adopt a more rational approach.

How does ABS perform after experiencing extremes?

Geopolitical uncertainty is extremely high with U.S. involvement. If the Iran war ends in March, international oil prices will revert to pre-war levels, with WTI primarily trading in the $63–70 per barrel range and Brent in the $68–75 per barrel range. If the Iran war persists for an extended period, international oil prices could surge further to $100 per barrel or even higher.

The uncertainty surrounding the Middle East situation has created a rather unclear outlook for the bulk commodity market. However, focusing on the fundamentals of the ABS market, apart from scheduled maintenance at a few plants, most ABS production facilities are operating steadily. With the Lantern Festival now over, downstream demand is gradually recovering, showing signs of incremental growth. Considering the significant price volatility around the Chinese New Year period, both petrochemical producers and the market have accumulated inventories post-holiday, and a substantial amount of profit-taking positions still needs to be digested. As such, ABS market prices are likely to remain volatile and disorderly through late March. However, once these profit-taking positions are gradually absorbed, the ABS market may return to a more normal trajectory by April. Given the rising cost of holding inventory and a relatively balanced supply-demand situation, prices hold a positive outlook. Even if geopolitical uncertainties in the Middle East persist, the ABS market is expected to exhibit relatively rational price movements, with extreme short-term spikes or crashes unlikely to reoccur.