Singapore (Platts)--22Nov2012/433 am EST/933 GMT

Demand for high impact polystyrene in Asia has fallen over the past one month on plunging acrylonitrile-butadiene-styrene prices, making it more attractive than HIPS for many customers, Asian HIPS producers said this week.

ABS is a more complex and comparatively stronger plastic than HIPS and tends to sell at a much higher price. But as the production cost of ABS has fallen on lower feedstock prices, the price spread between ABS and HIPS has been narrowing to hit $100/mt this week despite a slight recovery from the the $75/mt seen in the third week of October, the narrowest in seven years, according to Platts data. The prices of some specialty grades of HIPS were even higher than general purpose ABS currently, sources pointed out.

But despite some end-users switching to ABS, it has not resulted in any price support as both ABS producers and traders said that demand remains weak. Total ABS imports by key buyer China fell 8.9% from January to 1.404 million mt in September, customs data showed.

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ABS was assessed down $10/mt week on week at $1,880/mt CFR China Wednesday while HIPS was assessed $20/mt lower at $1,780/mt CFR China. Week on week, the spread between ABS and HIPS widened by $10/mt from $90/mt the previous week.

The two styrene monomer derivatives have some similar uses, such as in toys and air conditioners. Some end-users in China, especially in the toy industry, often switch between ABS and HIPS depending on the price.

Market sources said it makes sense for end-users to switch from HIPS to ABS when the price spread narrows to less than $150/mt. The last time the spread was $150/mt was in the third week of September.

The plunge in acrylonitrile and butadiene prices this year has led to a lot of volatility in ABS, which uses around 60% SM, and around 25% acrylonitrile and 15% butadiene. In the manufacture of HIPS, however, 90-95% of the feedstock is SM and the rest butadiene.

SM prices have been firm and relatively high for several months -- especially in China's domestic market -- due to supply crunch for SM and its feedstock benzene. The SM price has stayed between $1,500/mt and $1,600/mt CFR China since September 11.

Meanwhile, acrylonitrile and butadiene prices have been falling. Acrylonitrile has tumbled by $305/mt since the start of September to be assessed at $1,645/mt CFR Far East Asia on Tuesday. Butadiene has fallen $299/mt since early September to be assessed at $1,651/mt CFR China Wednesday.

--Gustav Holmvik, gustav_holmvik@platts.com --Edited by E Shailaja Nair, shailaja_nair@platts.com

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