OUTLOOK ’19: Europe PC, ABS sentiment on divergent paths

LONDON (ICIS)–While often used in conjunction with one another, the European polycarbonate (PC) and acrylonitrile butadiene styrene (ABS) markets appear to be pulling in different directions heading into 2019.

PC demand plummeted partway through 2018 in a way unanticipated by much of the market, and as yet has failed to recover.

This has left many market participants pessimistic about the strength of future pricing, with some anticipating a return to stark lows registered several years ago.

The increased capacity in China has led to supply in Europe lengthening, as domestic producers choose to export less while Asian producers seek an outlet for material.

As buyers are hesitant to commit to volumes before prices bottom out, there could be some recovery of prices in the first quarter of 2019.

All grades are likely to be affected by the softening, although the biggest difference will be felt for extrusion-grade material, as sentiment suggests these prices reached untenable heights in 2018.

There are few concrete predictions about when recovery is likely to occur, as the market was not expected to be thrown into oversupply.

The market continues to revolve around what is happening in China, and European producers are likely to continue chasing higher netbacks from this market.

Some have stated that fundamentals will balance out near the second quarter, whereas others are less sure.

This has led to a collapse in pricing of feedstock bisphenol A (BPA) despite any residual pressure for prices to rise on the back of tight phenol supply.

In contrast, ABS prices look set to track upstream markets, particularly key raw material styrene, as balance lost heading into the fourth quarter of 2018 has recovered.

Producers may find it harder to pass down any increases in production costs, as in recent months buyers have been buying ahead of traditionally strong times for the market to dodge rising prices caused by raw materials.

Styrene movements are tipped to remain volatile, but upstream pressure could affect secondary feedstocks acrylonitrile (ACN) and butadiene (BD), when several crackers have scheduled maintenance to coincide.

This may shake some of the seasonality that the market has traditionally followed, but there are no grave concerns, as demand is expected to remain fairly robust.

By and large the market is expected to cope with any increased prices in line with production costs, as projects to increase supply have been announced.

INEOS Styrolution is due to transform one of its three polystyrene (PS) lines at their site in Wingles, France, adding 50,000 tonnes/year.

Italy’s Versalis has announced to increase capacity by 30,000 tonnes/year at their plant in Mantova, Italy in 2020.

The ABS market is expected to continue growing in line with GDP, but demand is not expected to remain strong in every downstream sector, with the furniture segment and consumer electronics industry looking softer.

Although the price directions for both markets appear relatively defined, market participants are still apprehensive to make over-arching statements about what will happen on the market next year.

The ongoing tensions caused by the US-China trade war could divert trade flows of material, shift the costs of raw material or suddenly squeeze or lengthen global supply for both products.

This uncertainty is the factor driving much market sentiment ahead of the new year, with those both buy and sell side watching both the European and Chinese markets for indication of what is around the corner to enable them to react quickly.

PC is mainly used for electronic applications as it is a good electrical insulator and has heat-resistant and flame-retardant properties.

ABS is the largest volume engineering thermoplastic resin and is used in automobiles, electronics and recreational products.

Picture source: Ojo Images/REX/Shutterstock

Focus article by Morgan Condon