Downstream operations slacken amid virus-hit logistics, low demand in Europe

With Europe becoming the new epicenter of the COVID-19 pandemic, run cuts or closures at downstream plants have been on the agenda. Meanwhile, rising freight rates amid a shortage of containers and increased checks at borders indicate that supply chain disruptions lurk around the corner.

Lockdowns trigger run cuts, demand woes

Players reported that order cancellations and temporary shutdowns at plants are likely to be seen more frequently as a result of the logistics mishaps as well as demand contraction in certain sectors.


Auto makers suspend production, ABS under strong pressure

The automotive industry has been hit hard by the virus after months of contraction.

Several carmakers have suspended their operations in Europe and other virus-affected countries mainly due to the disruptions in the supply chains as a result of the coronavirus pandemic as well as health concerns.

A distributor affirmed, “Some companies are suspending production at their plants due to the containment measures amid COVID-19. Manufacturers close their plants to cope with the demand erosion. Plus, the automotive sector is very slow.”

A distributor said, “Our demand is slow as regional fairs have been cancelled or delayed amid virus concerns. Some of our ABS orders have been postponed as a result.”

According to several players, the full effect of the COVID-19 pandemic on the businesses will only manifest itself in the coming months. A reseller said, “Lockdowns led to the closure of toy shops and appliance stores. We may see the impact of the COVID-19 on ABS demand more clearly in May.”

Logistics challenges may reduce supplies

Players are wary of collapsing logistics operations any time soon. Now that certain sectors are facing order cancellations both from the local and export markets, this is going to add to the sluggishness.

If consumption declines further in case of extended lockdowns, run cuts may be seen through the entire production chain. A lack of feedstock availability may lead to closures of petrochemical plants in the near term. A few sources claimed that a South European producer reduced operating rates to 50% for PS.

April drops seem inevitable

With the slump in upstream markets, European polymer markets are bracing themselves for further drops in April. The bearish outlook has already slowed down demand as March draws to a close.

According to ChemOrbis Price Wizard, spot naphtha prices on CIF NWE basis plunged by 53% compared to the start of March. This sent spot prices to their record low levels since ChemOrbis started to collect data in 2008.

When it comes to monomers, spot styrene takes the lead in dramatic drops following the slump in the energy complex. This was followed by spot ethylene, for which supplies have been long, while spot propylene witnessed smaller drops. ChemOrbis data show that spot monomer prices dropped more than 34% for styrene on FOB NWE basis while ethylene and propylene on FD NWE basis fell by more than 15% for and 9% since early March, respectively.

April monomer settlements are expected to be closed with up to three-digit drops for styrene and ethylene while €70-80/on decreases are foreseen for propylene.

It remains to be seen how far polymer prices will move south. Sharp drops amid a possible demand collapse do not seem to be a remote possibility. On the other hand, some players opined that supply disruptions amid paralyzed logistics may alleviate the awaited plunge in prices.

Source : Chemorbis