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Europe’s PS, ABS markets to endure a turbulent month amid disrupted Asian supplies

by Manolya Tufan -
  • 25/01/2024 (13:04)
Regional styrenics markets opened the new year with rollovers as mounting supply concerns have yet to find a reflection on price levels owing to lethargic demand. The Red Sea turmoil has wreaked havoc on global supply chains, with many vessels being rerouted around the tip of Africa —a far longer and costlier journey. Players brace for substantial hikes next month as they assess the situation and its implications.

Global supply chains are once more in peril, with the new struggle in the Red Sea, the shortest passage between Asia and Europe, threatening import availability into Europe. Regional players remarked that prolonged disruptions will put Asian shipments in real jeopardy, which in turn will squeeze supplies into the bloc. However, participants expect PS markets to be affected to a lesser degree when compared to ABS in terms of its less dependence on imports.

Europe remains net-importer for ABS, loses net-exporter status for PS

Historical data from ChemOrbis Stats Wizard suggest that the EU27 imports slightly more ABS than it exports, disregarding a few years of even trade or vice versa. Thus, the shipping turmoil and surging freight rates will no doubt affect supply levels and ABS pricing in the following months. The data also reveal that imports exceeded exports in Europe’s PS markets in 2022 and 2023 January-November period, implying that the region’s traditional net-exporter status has been disrupted, as can be seen from the graphs below.

PS markets may still not be rattled as much as ABS

This is because the extent of Europe’s ABS markets’ reliance on Asian origins is bigger. According to ChemOrbis Stats Wizard, EU27 procured 62% of its ABS imports from South Korea in January-November 2023, followed by Taiwan holding a share of 17.6%. However, Europe’s PS market tells a different story, with Türkiye and Iran being the two largest exporters to the bloc with respective shares of 22% and 20% between January-November last year. To put it into perspective, nearly half of EU27’s PS imports were done from nearby countries including Türkiye, Iran and Egypt while Asian countries including China, South Korea and Taiwan formed only around 20% of Europe’s import PS needs.

*Right click the images and open in a new tab to view the full-sized graphs.

Higher import offers lift the sentiment

Many Asian suppliers applied ABS hikes ranging between €100/ton and €200/ton on their DDP offers to Europe, citing surging freight rates amid longer transit times as well as rising FOB prices. Import PS prices also rose to come at par with local ranges. Although buying interest faded after imports lost competitiveness, the firming in the import prices lifted the sentiment in the spot markets.

Some suppliers even stopped orders for ABS ahead of the awaited February hikes, while delivery delays also forced traders to close sales.

Spot markets on verge of Feb hikes

PS and ABS sellers mostly managed to hold onto their offers during the month, with burgeoning supply woes counterbalancing sluggish demand.

As for February, players talk about increases of up to 3-digits both for styrene and downstream markets, citing rising styrene spot prices and multi-year low PS and ABS prices. On top of surging freight rates and impending supply shortages, producers’ margin recovery targets will also add to the bull run next month. According to some players, margin concerns may even take precedence over the influence of the Red Sea crisis as they believe styrenics markets will be less affected than other polymers.

Spot markets will likely see a demand increase as buyers steer away from the import market amid uncertainties. Delivery delays of around 30-40 days and the extended lead times of around 3 months From South Korea keep markets edgy, let alone the unprecedented container freight hikes and Chinese New Year. Shipment backlogs traditionally occur during this time of the year.

Regional sellers are preparing to enjoy boosted sales amid a lack of import availability, while some sources even argued that these disruptions may last at least for 3 months.

Last but not least, buyers are wary of a drop in domestic inventories as regional suppliers may direct their volumes to nearby Türkiye, which suffers the most amid supply disruptions.

Concerns over derivative demand remain

While buyers showed limited interest in stocking up material despite supply woes, sellers reported to have received higher orders. Some converters bought beyond their needs to hedge against higher freight rates and firmer February voices.

Even though concerns over delivery delays manifested itself in the form of better buying sentiment, consumption in derivative markets is unlikely to improve anytime soon.

A converter said, “Sales of air conditioners, automobiles and white goods fell visibly in Europe. It’s not only us being cautious with our raw material procurements amid the bleak outlook. End users are also prudent.”

Those buyers who avoid building stocks justified their decision with calm order entries, while also adding, “We are planning to use what we have in stock to produce or wait for the en-route cargos.”
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