Sentiment turns softer in Europe’s PS, ABS markets on weak demand

Europe’s styrenics markets showed signs of fatigue in May after the strong upward momentum seen throughout March and April. Although May saw further increases passing on deals following higher styrene settlements, market sentiment across the region has turned significantly more cautious, with converters reducing their purchasing activities and competitive ABS imports returning to the market.

Going ahead, both PS and ABS players are increasingly questioning the sustainability of current price levels owing to weak demand and improving supply conditions.

Stagnant demand weighs on PS prices in May

While regional producers initially approached the market with hikes matching or exceeding feedstock increases, the lack of demand support limited the size of gains and forced some sellers to concede to even rollovers in an attempt to stimulate sales. However, these efforts failed to revive demand, reinforcing concerns about the sustainability of current price levels in the following months.

Sellers reported very limited sales volumes during May with some of them lamenting having concluded almost no deals in the last few weeks as converters largely refrained from fresh purchases. Many buyers remained sufficiently covered, while elevated price levels encouraged a wait-and-see approach, also considering growing expectations for downward adjustments.

ABS sees increases of up to three-digits but demand slows

The European ABS market maintained a firm trajectory in May, with deals seeing hikes of up to €120/ton due to higher feedstock costs. However, some suppliers turned more flexible later in the month and trimmed their prices down to increases of €50-85/ton as buyers were cautious with fresh purchases amidst elevated price levels, the easing of supply constraints and their weak derivative markets.

After the good order entry seen in March and April, market participants widely described trading activity as subdued in May. Converters kept purchases hand-to-mouth, especially considering their expectations to see drops in the following months. Difficulties in passing higher resin costs downstream continued to weigh on sales, while many buyers remained out of the market, citing their sufficient stock levels.

Supply conditions improve both in PS and ABS markets

Players concurred on the fact that overall availability improved compared to the last few months as slower demand reduced pressure on regional markets, with buyers facing no major difficulties in covering their needs.

Some distributors continued to have tight HIPS availability due to the force majeure at Trinseo, while the producer lifted it in the second half of the month. As for ABS, meanwhile, INEOS Styrolution and Elix Polymers also lifted their force majeures in the last few weeks.

These factors, combined with sluggish consumption, further eased concerns surrounding prompt availability across the bloc and strengthened buyers’ expectations for a market correction in June.

Asian imports return to pressure ABS market

Imports returned more aggressively to the European ABS market during May, with players reporting a growing number of offers from Asia and Saudi Arabia at lower levels with respect to domestic European prices.

Nevertheless, long lead times and logistic uncertainties continued to prevent buyers from engaging in long-distance purchases, not to mention their softer projections for local markets over the summer period.

Players mostly foresee drops but eyes on costs

Expectations for the upcoming styrene monomer settlement remain divided. On one side, firmer benzene prices support expectations for a firmer styrene contract. On the other side, weak downstream demand is likely to weigh on the market, leading to rollovers or minor adjustments for June styrene settlements, according to some players.

However, market participants believe that, even if costs rise further, PS and ABS markets might not be able to absorb fresh gains given already inflated prices and the lack of demand support. At the same time, should styrene settle firmer again, producers may continue prioritizing margin preservation and attempt additional increases.

Meanwhile, growing import competitiveness and the €40/ton drop in butadiene costs are other factors that may weigh on the ABS market in June, apart from unsupportive market conditions.