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December hints at further hikes in Europe’s PS, ABS markets

by Manolya Tufan -
  • 23/11/2020 (04:05)
European PS and ABS players are bracing themselves for further increases in December, blaming rising spot styrene prices and more importantly supply constraints. A lack of Asian imports has exacerbated ABS tightness, while PS availability has failed to return back to normal levels following plant restarts.

ABS rally gained steam in Nov, hitting around one-and-a-half year high

ABS markets opened the month with three-digit increases, which were larger than the cost pass-through from styrene and butadiene amid ongoing supply shortage. The weekly averages of ABS extrusion and injection prices both in Italy and Northwest Europe reached their highest levels not seen since around June 2019, ChemOrbis data showed. Prices have risen by 25-27% since the uptrend kicked off in early June.

What is more, the bullish rally was supported by the gradual recovery in the automotive industry and uninterrupted demand for home appliances.

Resumption of imports from Asia unlikely until 2021

European ABS markets lagged behind the firming of Asian markets, where China’s import market hit nearly a decade high amid robust demand. Since Asian suppliers mostly focus on China, regional players believe that fewer imports are likely to arrive in Europe due to the poor netbacks.

“One of our South Korean suppliers said that their quotations may remain limited until February. Some suppliers had to reduce allocations as they failed to catch up with the incoming orders due to supply issues at a regional producer and absence of Asian suppliers,” a distributor remarked.

Soaring freight rates amid a lack of container availability also need to be reflected on ABS pricing, which will keep prices elevated and supplies restricted over the upcoming term. A trader reported 4-5 weeks of delays in deliveries from Asia.

Moreover, a regional player thinks that the mega-pact signed by China and Asia-Pacific nations may have an impact on the European market in the longer run.

PS sees relatively smaller gains than ABS

PS deals were closed with increases of around €60-70/ton in November after following a stable to softer trend in the past two months. The weekly averages of GPPS and HIPS extrusion prices both in Italy and Northwest Europe have risen by 15-18% since early June, according to ChemOrbis data.

Yet, the firming trend in the PS market lagged behind ABS as prices have yet to reach their pre-pandemic levels.

A few players argued that November increases were driven by supply constraints and rising costs rather than underlying demand.

Although PS supplies were not as short as ABS, regional availability was restricted amid low stock levels on the producers’ side. Delivery issues in the local market were attributed to the fact that producers were unable to build sufficient stocks after their maintenance works.

A distributor reported that their supplier is not available to give extra quotas for some GPPS grades and deliveries take longer than usual.

Spot styrene surged during Nov, eased off w-o-w

Apart from supply constraints, spot styrene prices that mirrored sharp gains in Asia are expected to support PS and ABS markets in December. Styrene contracts are expected to settle with increases of up to three-digits for next month. Still, players report that they may revise their expectations depending on the path styrene follows during the rest of November.

According to ChemOrbis Price Wizard, spot styrene prices on FOB NWE basis rose by $335/ton since early October before easing off slightly in the past week.

A similar trend may be seen in December

ABS market may see further increases similar to those in November, supported by ongoing shortage. Yet, PS players expect to see smaller gains when compared to ABS, as was the case in November, considering shorter working days in December and the impact of re-imposed restrictions. A manufacturer said that they may skip or postpone purchases in case of hefty hikes.
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