Soaring costs clash with weak ABS demand ahead of August in Europe

After a period of steep price corrections, the European ABS market is showing the first signs of a potential shift in sentiment. Although weak demand and comfortable inventories kept pressure on the market throughout July, the recent rebound in crude oil along with firmer styrene and benzene values has reshaped expectations for August.

While the market had broadly anticipated another round of declines next month, rising upstream costs linked to renewed geopolitical tensions and tighter feedstock fundamentals have prompted suppliers to reassess their pricing expectations. The discussion has gradually shifted toward whether the current downtrend is approaching its end. Nevertheless, underlying demand remains fragile, leaving market participants divided over the market’s direction in the weeks ahead.

Suppliers concede to deeper drops in July

The majority of suppliers continued to grant substantial reductions throughout July, with transaction prices seeing drops of up to €300/ton and even larger cuts in a few cases. In many instances, reductions exceeded the decline in raw material costs as sellers sought to stimulate buying interest and move volumes.

However, despite these aggressive concessions and a slight increase in price inquiries, overall demand remained subdued, with buyers continuing to limit purchases to immediate requirements.

Import offers also remained highly competitive throughout July. Although most Asian suppliers largely maintained their offer levels, they have recently started signaling firmer pricing intentions for the coming month amid higher feedstock costs and elevated freight rates.

Buyers remain absent despite historically large price reductions

On the demand side, converters showed little urgency to return to the market despite the significant correction in prices. Many buyers continued relying on inventories accumulated during the spring pre-buying period, restricting fresh purchases to essential volumes only.

Weak downstream consumption remained the main obstacle to stronger buying activity. With limited visibility over incoming orders and the summer holiday season already underway in parts of Europe, converters saw little incentive to replenish stocks ahead of August.

Buyers also remained skeptical about suppliers’ ability to implement price increases in August. While acknowledging the recent recovery in feedstock costs, many argued that persistently weak demand would continue to limit suppliers’ pricing power.

Will higher costs outweigh weak demand in August?

The outlook for August has become considerably less straightforward than it appeared only a few weeks ago. Brent crude has climbed above $98/bbl during intraday trading sessions as renewed disruptions around the Strait of Hormuz and the Red Sea revived geopolitical risk premiums, while benzene and styrene markets also strengthened on tighter supply fundamentals. Spot styrene prices currently stand around $320/ton above late June levels, according to ChemOrbis Price Wizard.

Lower European styrene operating rates, limited import availability and the planned prolonged mothballing of LyondellBasell’s PO11 styrene unit in Rotterdam continue to support sentiment, while LyondellBasell’s force majeure at its Wesseling butadiene plant due to low Rhine water levels has added another element of uncertainty to the regional feedstock chain.

Against this backdrop, many market participants expect higher production costs in August, increasing pressure on suppliers to seek price increases in order to protect margins.

Nevertheless, most market participants continue to believe that market fundamentals will remain the decisive factor. Comfortable inventories, subdued downstream consumption, and the traditional summer slowdown are expected to keep purchasing activity muted, making it difficult for suppliers to fully pass through higher costs.

As a result, a meaningful price recovery still appears unlikely unless demand improves materially . Instead, the market is increasingly caught between rising cost pressure and persistently weak consumption, making stabilization or limited price changes a more realistic outcome than either another round of steep declines or a significant rebound.