Will European PS resume uptrend on rising costs?

In February, spot PS deals were mostly closed with decreases of €50-70/ton after four straight months of price hikes. Players are now discussing whether or not PS markets will reverse direction in March with surging energy costs on one side and uncertain supply-demand outlook on the other.

Oil tops $105/bbl on Russia’s attack on Ukraine

Russia’s full-scale invasion of Ukraine rattled energy markets, posing risks to further supply disruptions. Brent crude sharply increased during intraday trading on Thursday to breach $105/bbl for the first time since 2014. Spot naphtha prices in Europe surpassed $900/ton CIF NWE threshold in the week ending February 25, ChemOrbis Price Wizard showed.

March styrene expectations call for hikes

Players are bracing themselves for cost-driven hikes as soaring upstream markets will have a knock-on effect on downstream prices. Strong crude oil and naphtha prices are expected to pave the way for increases in March ethylene, benzene and styrene contracts.

Spot styrene prices have been mostly hovering at around their most recent levels for the past one week. However, spot prices on FOB NWE basis rose by around $100/ton since late January. This along with potential hikes in the monthly ethylene and benzene contracts will probably lead to a higher styrene outcome. Expectations center around moderate increases for now.

Rising costs likely to counterbalance weak dynamics

It remains to be seen if PS markets will be able to reverse the course in March as expectations call for a stable to slightly firmer trend. PS suppliers expect prices to track upstream markets higher, while buyers are sceptical about cost-driven hikes.

Supply levels are deemed as balanced after the return of capacities inside Europe. Although converters report delivery delays, they mostly stem from the trucker shortage rather than tight availability on the producers’ side.

The construction sector has been outperforming other segments, with converters in the insulation sector reporting good order entries. Tightness for EPS prevailed amid a lack of sufficient imports for black-grey EPS and production hiccups, while some regional suppliers reportedly have no extra quotas amid still healthy demand for main EPS applications. Still, converters are less optimistic about the sustainability of demand from their customers as they are wary of the fact that soaring energy costs may harm buying appetite.

Meanwhile, players have noticed a slowdown in overall activities. Buyers are rather cautious with their purchases as they do not want to replenish stocks at elevated levels, considering slowing demand in their end markets. They point to the rising utility costs exacerbating pressure on their activities. A participant said, “We expect prices to stabilize amid firmer costs and waning demand. Prices have already been standing at multi-year highs.”