Bullish expectations lose steam in European PS markets

Having closed January deals with increases, European PS players have turned their focus to February outlook, with their eyes on styrene. Producers intend to raise their offers for the second straight month in February, while hike expectations have been trimmed in the wake of lower energy markets.

How did the New Year start?

The €64/ton higher styrene contracts for January bucked the three-month downtrend in the European PS markets. Prices rebounded from a decade low in Italy.

Some sources reported seeing improved demand due to the restocking activities, which made it possible to achieve hikes in line with the styrene upsurge. Firmer expectations for both styrene and PS were also blamed for boosted buying activities as some buyers secured extra stocks to avoid paying further hikes in February.

Demand remains relatively weaker in Italy due to plastic tax

Still, demand in Italy has been weaker compared to Western Europe as it is affected by the tax on disposable plastics. Demand remained tied to solely basic needs, several players concurred.

A packager lamented, “There is this confusion about the implementation of the tax on plastic packaging. This is hindering future investments and uncertainty prevails over our business.”

SM expectations revised as spot prices came lower

Spot styrene prices on FOB NWE basis have pared a large portion of their earlier gains in the past two weeks after hitting nearly three-month high, according to ChemOrbis Price Wizard.

This is expected to find reflection in the February styrene settlement as lower energy complex weighs on the contract negotiations.

Initial expectations were calling for hefty hikes in February contracts due to the successive increases seen in the first half of the month.

However, these expectations have evolved following the plunge in the energy complex. A market source reported, “We still expect to see double-digit increases in the styrene contracts as restocking activities reduced monomer availability during the month. However, the drastic drop in crude oil futures may keep the extent of expected styrene increases in check.”

Meanwhile, February benzene contracts settled €63/ton higher from January while ethylene contracts indicated rollovers from last month.

PS sellers aim to carry increases into 2nd month

With the expected support from rising costs earlier in the month, PS producers mull over raising their offers further in February. Still, earlier expectations calling for visible hikes have run out of steam, as is the case with styrene.

Confirming that bullish expectations for February have cooled off recently, a player said, “We heard expectations about styrene increases of €40-50/ton for February as weaker crude oil prices recalibrated contract expectations. Sellers might aim to apply increases larger than the possible monomer increase in February to boost their margins. However, we assume that these attempts would not be workable.”

Although the majority of players see little possibility for a reversal in the market trend, some remained hesitant about renewed hikes as they think that demand will play a significant role in determining the market direction.

The lack of a major support from supply-demand dynamics may keep expected PS increases in check, a distributor opined.