Excess capacity & weaker demand for ABS would bring challenges in the next 5 years

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ABS, a terpolymer of Acrylonitrile, Butadiene and Styrene is suffering from a very low capacity utilization and weaker demand, particularly in North America, Europe and Japan. The global demand in 2001 is closer to 4 million tonnes compared to the nameplate capacity of about 6.3 million tonnes. China, having almost 1.5 million tonnes demand in 2001, is however expected to provide some relief. This, due to the expected demand growth of about 8-10% for the next 5 years in the country. Some of the other Asian countries like India are also likely to have good growth potentials. However, the developed economies like that of North America, Europe and Japan may grow very meagerly. In fact, the demand in these regions have been going down since the last 5 years as many of the consumer durable industries have relocated their ABS processing in China on account of cost benefits.

The typical consumption pattern of ABS is distributed as:

Application Segment	(%)
Appliances	35
Consumer Electronics	15
Transportation	15
Pipe	5
Others	30
Total	100 (4 million tonnes)

The capacity of 6.3 million tonnes is tilted towards Asia and is expected to increase by almost 1 million tonnes in the next few years. This excess capacity is expected to continue almost at the same level for the next few years.

The regional distribution of capacity is:

Region	Million Tonnes	(%)
Asia	4	63
North America	1.2	20
Europe	1	16
Rest of the World	0.1	1
Total	6.3	100

Chi Mei, the largest producer with 1.2-1.3 million tonnes has almost 20% share of the capacity. The other 4 major players have almost 2.5 million tonnes capacity. They are:

Company	Million Tonnes
GE Plastics	1
Bayer	0.8
BASF	0.4
DOW	0.35

These 5 major producers have almost a 55-60% share of the global capacity.

The increasing demand in China and the other Asian regions will make ABS business more focused towards Asia. It is hence not surprising that more investments are being made in this region.