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Initial ABS prices for July see larger increases than PS in Europe

by Manolya Tufan - mtufan@chemorbis.com
  • 06/07/2020 (09:11)
July offers started to surface with increases in the PS and ABS markets after monthly contract settlements were agreed higher. This has been the second straight month of increases in Europe’s styrenics markets. Meanwhile, initial ABS offers were revealed with larger increases than PS amid a lack of import supplies.

A European major seeks larger hikes on ABS

Ineos Styrolution announced its PS and ABS prices for July with respective increases of €85/ton and €110/ton following €86/ton increases in the styrene settlement. PS offers were revealed with increases in line with the styrene upsurge as expected, while ABS increases came above earlier expectations.

Players attributed this to the €25/ton higher butadiene settlement and prospects of restricted import availability. Buyers wait to see if European major’s pricing policy will gain traction in the wider market.

Lack of imports supports ABS

Apart from the cost support, the lack of competitive Asian imports gave an upper hand to the regional sellers in Europe during June. A source from a regional producer affirmed, “Our sales volumes in June were higher than anticipated due to the lack of import volumes. Regional suppliers aim to issue visible increases on their ABS offers to align with the price levels in Asia.”

Asian suppliers focused on exports to China rather than Europe as China’s import ABS market hit multi-month highs after the uptrend kicked off as of early May. Import availability in Europe may remain restricted so long as ABS prices in China hover at around their current levels, players argued.

In production news, South Korea’s LG Chem is set to conduct a week-long planned maintenance work at its ABS plant by the second week of July, which adds to already tight availability in the region.

Will it be supply or demand to determine ABS hikes?

Despite restricted imports, players find initial ABS hikes too large to be fully absorbed and sellers may need to step back, as was the case in June. The automotive industry has not fully recovered, while there are signs of recovery in the home appliances sector.

Buyers are sidelined to see which factor will come to the fore in determining how far prices can go up.

PS buyers to resist initial hikes on tepid demand, summer holidays

Although some pre-buying was seen amid firmer voices for July, PS buyers were mostly sourcing on a needs only basis.

Packaging demand subsided following its peak during the lockdown period. Growing need for single-use plastic packaging and medical applications had supported PS prices in the previous months, while consumption in these segments slowed in line with the normalization steps. Vending sector is muted due to the closure of offices and schools, meanwhile.

A sheet extruder reported, “We noticed a slowdown in our demand compared to May. Demand may flatten during July. We avoided building stocks due to the blurry outlook amid economic concerns. PS may post smaller increases than that of styrene hike in July.”

The ongoing uncertainty caused by the pandemic and approaching summer holidays may put a cap on sellers’ initial hike requests. PS buyers are likely to resist paying the entire styrene increase, pointing to their reduced requirements amid flagging demand.

Disposable ban prompts closure of GPPS lines, keeps medium-term outlook weak

In an attempt to phase out single-use plastics, some European countries will ban the sale of plastic cutlery, straws, food containers and cotton buds next year. Germany approved a ban on the sale of single-use products in line with the European Commission’s plastics strategy.

Meanwhile, the Italian government postponed the tax on plastics to January 1, 2021.

Although the spread of the coronavirus pushed some countries to delay commitments, players concur that these developments cast a shadow on the medium-term outlook as converters are turning their focus to alternative solutions from now.

Similarly, many producers are reportedly shifting their GPPS lines into ABS in a bid to counterbalance lower demand due to the ban on disposable plastics.
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