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Will it be another month of softer prices in Europe PS, ABS markets?

by Esra Ersöz - eersoz@chemorbis.com
  • 28/10/2019 (12:27)
PS and ABS markets have largely closed October with price drops from the previous month while rollovers were also obtained in some cases across Europe. Heading to November, players are pondering whether stagnant demand will weigh further on the outlook for a second month.

PS demand woes deepen in packaging sector

Although the trend turned stable to soft in October in European PS and ABS markets, the downside was limited to €20/ton in many cases in line with the settlement of monthly styrene contracts.

As the month wore on, concerns over stagnant demand appear to have grown with sellers complaining about their poor sales performance. A distributor in Italy said, “PS demand has failed to improve in October. Buying has been particularly hit by the ongoing dispute over the ban on disposable plastics.”

The low season for the packaging sector is also contributing to the stagnancy of demand. A packaging maker in Germany acknowledged facing quite weak demand for his end product, adding that he skipped his HIPS purchases this month.

ABS stocks accumulate on poorly performing automotive industry

Several sellers in Germany and France reported that ABS buyers either bought their bare minimum requirements or remained sidelined due to the challenging conditions in the automotive industry. This naturally resulted in higher stocks on the sellers’ side and pushed them to concede to discounts.

Accordingly, supplies in the ABS market are considered more than comfortable. A trader affirmed, “Our stocks remain high, although we usually sell large quantities of material in September and October.”

Economic data affirms growing gloom over demand

Back in September, manufacturing contracted for the 8th consecutive month in Europe. On top of it, September PMI marked the lowest reading since October 2012. Investment goods producers saw the sharpest drop, followed by intermediate goods. Consumer goods, meanwhile, contracted for the first time since November 2013.

Data also suggest that new passenger vehicle registrations in the European Union (EU) and EFTA countries contracted by 3.1% in the first half of 2019. The European car industry is responsible for a fifth of world automotive production.

Lower upstream dents PS sentiment further

Apart from supply-demand, the upstream chain is also weighing down on the sentiment. Spot styrene and benzene prices retreated by 7% and 10% respectively since late September in Europe, although styrene pared some of its losses last week.

Thus, European players in the PS and ABS markets widely expect to see a lower outcome in November styrene contracts.

Will downturn gain momentum in November?

November suggests a weaker outlook than October both in terms of supply-demand and upstream developments. Accordingly, some expect the downturn to gain speed next month both in the PS and ABS market. However, sellers are likely to keep these in check in an attempt to recoup margins.
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