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European PS, ABS markets gear up for steeper drops into 2023

by Manolya Tufan -
  • 05/12/2022 (02:33)
In Europe, styrenics players are bracing themselves for visible drops in December amid lower styrene settlement, huge disparity between local and import prices and poor market dynamics. Indeed, the fact that there are no signs of markets being on the mend heading into 2023 adds to the cautious stance among buyers.

Spot styrene down to 2-year low

December styrene contracts posted sharper than anticipated drops, which reinforced the bearish mood among buyers waiting for fresh guidelines from their suppliers.

Following a short-lived rebound in early November, spot styrene prices have been on a downward path and hit 2-year low in the week ending December 2. According to ChemOrbis Price Wizard, FOB NWE styrene prices posted a cumulative drop of $340/ton or 26% since early Q4.

Participants attributed styrene drops to earlies losses in benzene and crude oil prices. December benzene settlement indicated €196/ton drops from November. Meanwhile, Total restarted production at its styrene unit by around mid-November. Yet, two regional suppliers keep their styrene lines shut amid poor market conditions.

PS down for 5th straight month

Spot PS markets opened the month of December on a bearish note following €132/ton lower styrene settlement. Initial offers started to emerge lower as a major producer applied €90/ton drops on its GPPS and HIPS offers valid as of December 1st.

After seeing 3-digit drops in August and September, smaller drops of around €50/ton passed on October-November deals. The slump is likely to deepen providing that distributors decide to destock by the year-end to stir buying interest. Yet, purchasing activity will be lower than November as buyers are buying according to their needs as they hope to see additional drops. Despite run rate cuts, overall supply levels -except for certain grades- are in balance with eroding demand.

Moreover, there are few players projecting a rebound as of early Q1 amid elevated price levels inside Europe and more importantly economic downturn. Hence, regional producers will have to either go for deeper rate cuts or issue larger decreases going forward. It remains to be seen whether or not deeper rate cuts or potential hikes in utility costs will prop up prices in January.

Total resumes PS production, FM remains in place

In production news, Total resumed its PS production in France by the end of November. Still, sources reported that it will take some time to lift the force majeure. Overall PS availability is expected to improve after 2 months of absence of the producer.

Competitive import prices lure ABS buyers back

Spot ABS markets have been mostly tracking a downward trajectory since around May. Fresh December offers were still pending by the end of the week, while bearish expectations came to the forefront amid weak demand and a potential price competition among sellers.

Some participants expect regional sellers to cut their offers by €150-200/ton to somewhat realign with other sources. Sellers reported hearing aggressive import ABS offers at or below €1900-2000/ton DDP, 60 days with delivery in January-February.

The huge gap between Europe’s spot and import markets prompted some buyers to shift their attention to Asian volumes. European price ranges last stood at around €2400-2500/ton for natural inj. and ext. on FD, 60 days basis.

A distributor remarked, “Competitiveness of imports is the main issue now. Since buyers are purchasing Korean material, regional sellers face strong difficulties in selling. This and low demand leave them with high stocks.”

As for ABS, near-term projections are not looking any better. Stagnant derivative markets and long availability continue to cast a shadow on the ABS markets. The Asia-Europe arbitrage trade may remain intact so long as freight rates hover around their current levels and Asian markets fail to stage a recovery.
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