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Europe’s PS, ABS markets supported by higher styrene, will it last long?

by Manolya Tufan - mtufan@chemorbis.com
  • 13/06/2022 (02:49)
In Europe’s styrenics markets, a slight increase in the monthly styrene contact took players by surprise as they were anticipating visible drops. June styrene contracts settled slightly higher following a hefty hike in benzene settlement. Although PS and ABS players had earlier foreseen large drops in June, regional suppliers mostly approached the market with rollovers to small decreases.

Still, the sustainability of early month pricing policies remains under question due to unsupportive supply-demand dynamics. Indeed, there have been sporadic reports of notable drops for PS and ABS towards the end of last week.

PS mostly stable

Apart from a regional supplier seeking small hikes, most PS producers issued rollovers on their June offers. This was attributed to the slight styrene hike rather than supply-demand dynamics. Trading activity has been slow due to the bank holidays in early June.

Regional producers aim to stand adamant on their rollover requests, supported by higher feedstock costs. However, sellers in the distribution channel may issue drops as the month wears on if demand remains sluggish. PS sellers offering rollovers have reported a lack of buying interest.

A distributor said, “We started to offer rollovers but we will evaluate whether to revise our offers down by mid-month depending on demand. Customers are not in urgent need of material.”

“Producers may reduce their prices only depending on the starting level and purchasing tonnages. Yet, we exclude sizable downward revisions from all producers during the month,” opined a trader.

Although a few buyers reported that their supplier issued sizable drops, this could not be widely confirmed by other participants.

ABS slightly down on lower feeds

Initial ABS offers emerged with rollovers to decreases of around €50/ton as lower ACN contracts outweighed slightly higher styrene and butadiene settlements. However, higher styrene contracts hindered larger drops for ABS.

A major market participant said, “Some distributors were offering with drops for June. However, higher styrene settlement led to a change in their attitude. Sellers may issue some decreases, albeit in small amounts, depending on their stock pressure.”

Buyers find the size of ABS drops limited and push for further discounts. A distributor said, “Our supplier applied small discounts, while we placed lower bids. If the producer does not accept our bid, we will skip purchases this month. We still have some material in stock and demand is low.”

Although not widely confirmed, some sellers applied sizable drops as their prices were forming the upper ends in the market. A seller noted, “We had to cut our offers as we were unable to sell. But demand remains calm. Drops will be inevitable in the following months if demand doesn’t show an uptick.”

Supplies are accessible

Supply and demand were more balanced compared to the previous months. This was due in part to lower sales volumes in May, considering the fact that buyers mostly skipped purchases amid bearish expectations.

As a side note, overall availability showed signs of improvement following the end of shutdowns at major producers.
Should demand remain low, producers may cut rates to rebalance the market, a player argued.

When it comes to imports, Asian volumes continued to remain limited as logistics challenges hindered arbitrage opportunities. Several buyers shunned imports from Asia due to long lead times.

Protracted discussions on horizon

On the demand front, purchasing activities were defined as cautious. Converters find the prevailing levels elevated as prices stand close to all-time highs. Buyers have been postponing purchases since May as they expected to see drops in June and July.

Moreover, demand from packaging and appliances sectors slowed down, weighing on PS and ABS consumption. War-related uncertainties and macroeconomic woes loomed over consumer spending. A player said, “ABS demand decreased by 20-30% in the past few months as appliances and automotive sectors feel the pinch of inflation.”

Initial July expectations call for some drops, which also keep purchases at bare minimum.

A seller said, “We have received some requests but buyers are only interested in hearing fresh offer levels rather than buying.”

A lack of support from the demand side is likely to weigh on trading activities and lead to protracted discussions as some buyers are buying in pallets rather than in large quantities.
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