European ABS market yields to demand plunge, higher supplies

After opening the month with rollovers to slight hikes, regional ABS sellers had to revise their July offers down to rollovers or decreases from June. Despite being relatively modest, initial hike attempts proved unworkable due to visibly falling demand and lengthening supplies amid the arrival of imports.

Decreases of up to 3-digits heard for July

Buyers started to place lower bids shortly after initial announcements were unveiled. Deals were closed mostly with rollovers to some decreases varying in size, while up to 3-digit declines were also heard in some cases depending on the starting level.

Nevertheless, spot ABS markets are still elevated as they stand close to their April peaks, supported by higher feedstock settlements.

More Asian volumes available, but offers meet lukewarm interest

Persistently weak demand scene in Asian ABS markets - as a result of COVID-19 related lockdowns in China - as well as gradually easing freight rates lured regional suppliers back to Europe, which offers juicy netbacks. Import volumes have become easily obtainable at competitive levels recently. This put an added strain on regional markets.

Although recent import offers stood well below European spot ranges, they failed to turn into deals due to some buyers’ reluctance to engage in import material amid long lead times and fundamentally lower demand.

Demand woes deepen amid darkening economic scene

Transacted volumes were negligible, considering buying fatigue amid elevated price levels and demand collapse in the key derivative sectors. Distributors also refrained from purchasing to avoid higher stocks amid bearish projections for the short term.

Macroeconomic headwinds have taken their toll on the durable goods sector for some time now, which led to lower resin consumption. The automotive and appliances sectors were affected the most by the cost-of-living crisis across the board. Fears over a global recession are growing amid central banks’ efforts to tame decades-high inflation across many countries. That is to say, ABS consumption is unlikely to improve soon amid economic woes and summer holidays.

Weak upstream markets add to the bearish Aug outlook

Last but not least, players in the styrenics markets are bracing themselves for sharp corrections in the next benzene and styrene settlements. This will be mirrored into ABS pricing in August, reinforcing the bearish run despite the €40/ton ($41/ton) higher butadiene settlement for August.

According to ChemOrbis Price Wizard, spot benzene prices on CIF NWE basis plunged by $630/ton compared to their mid-June peak, while spot styrene prices on FOB NWE basis declined by $230/ton since the start of July.

A seller opined, “We expect the ABS market to recede further in August as styrene contracts are expected to settle with large drops.”