European PS market shattered by massive hikes, even rollovers ensue for ABS

Styrenics markets in Europe were shattered by the extent of fresh hikes in styrene and benzene settlements for July. PS offers emerged with massive hikes, while ABS saw rollovers or milder hikes under the shadow of weak demand. Players discuss what lies ahead, as the sentiment is torn between strong costs and weak fundamentals.

PS sees 3-digit hikes

Regional players reported increases in a wide range of €150-290/ton for July, depending on the starting level of the price negotiations. Suppliers mostly applied increases of €170/ton for PS, slightly surpassing the hike in the styrene settlement. This was attributed to the high utility costs and tight producer margins. Hence, they aim to remain firm on their initial hike requests.

Meanwhile, other suppliers opted for smaller increases just to reflect the cost pass-through from styrene settlements, pointing to elevated PS prices. Indeed, July hikes pushed PS prices to fresh highs.

Hefty hikes hamper demand

Trading activity has ground to a halt following strong hikes for PS. “We have not received any calls from our customers after unveiling our new offers. Demand has almost been nonexistent,” said traders.

There is little optimism about smooth sales this month, with converters sticking to the sidelines. Buyers have already been unable to reflect soaring costs on their end product prices, eating into their razor-thin margins. Hence, renewed hikes dented buying appetite further.

ABS sellers seem open to negotiate

Apart from Trinseo, who announced €90/ton hikes, other suppliers mostly applied smaller increases of up to €50/ton for ABS.

Sharp ACN drop was cited as a factor keeping ABS hikes restricted, while demand is known to be weaker than PS. Although high utility costs put an added strain on producers’ margins, they had to reflect only the cost pass-through from feedstock settlements due to weak fundamentals.
Even rollovers ensued for ABS in some cases, while it may gain traction in the wider market as sellers seem rather flexible.

Suppliers mull over rate cuts on high costs, waning demand

More producers may decide to run their plants at lower rates, considering rising stock levels amid a lack of confidence in demand outlook. A regional producer currently running at full rates said, “We may cut rates slightly as our order entries dropped compared to the same period of previous months. It makes no sense to build stocks with such high costs.”

Current price levels cannot be sustained

As inventories pile up and demand subsides further, the prevailing price levels cannot be sustained. Several converters hope to see price corrections for PS during the rest of July. As for ABS, meanwhile, some converters have already started to place lower bids given weak demand and ample supplies.

Styrenics markets have been propelled higher by costs in the past few months, while this was not supported by supply-demand dynamics. Styrene contracts settled higher on the back of benzene in the past two months.

Spot styrene prices rebounded slightly as of early July following a force majeure declaration on Covestro/LyondellBassell’s styrene unit. However, this is not expected to have a significant impact in the long run as supply-demand dynamics for styrene remain unsupportive. Plus, spot benzene prices saw sharp downward corrections both in the US and Europe as cost escalations forced derivative producers to cut rates.

PS and ABS prices can no longer absorb further increases, players have concurred. Regardless of costs, prices are expected to see corrections amid weak market fundamentals. Resin consumption is not expected to increase heading towards summer holidays in Europe, let alone widespread uncertainties emanating from the war, economic headwinds and high volatility in crude oil markets.