London (GC Intelligence) – May saw more bad news across all engineering resins. Polycarbonate and PMMA suffered the largest losses, while PA66, after a period of tightness, showed better balance which finally provided an opportunity for buyers to negotiate lower prices. Supply also increased for ABS as Asian importers remained competitive and fuelled the oversupply that led to a loss in margins. While SAN’s low exposure to the automotive sector allowed sellers to pass on the entire cost increases, the compounding sector experienced the same fate as all other markets, namely low activity, oversupply and feeble demand growth.
Market fundamentals were weak in May, but there were some encouraging signs in some segments. While the automotive industry was still suffering, the construction sector was in better shape. An improvement in supply in PA66 allowed buyers to secure decreases and triggered a downward revision of the price forecast. The PA6 market is well-supplied and prices are expected to remain relatively flat throughout the forecast period to March 2020.
Activity failed to pick up in May and prices increased less than raw material costs. After a rather weak April, partly due to the short month as a result of the public holidays and expectations of improved trade relations, a better market was expected in May. The reverse seems to have taken place. Trade disputes worsened and economic activity remained lacklustre. While there was some seasonal growth in construction, demand in other sectors was weak.
Prices in Europe increased in line with raw materials, which was slightly lower than expected. After a short April due to public holidays, demand in May failed to pick up as expected. An increased negative sentiment concerning tariffs and worries over another conflict in the Middle East kept the market cautions. With the summer slowdown approaching, demand, costs and prices are expected to decrease in the next few months.
Prices resumed the downward trend as heightened uncertainty softened demand further in May. The tariff dispute that could soon involve Europe were expected to be resolved earlier this month, but instead the situation worsened as the US followed through with the threat of increasing tariffs from 10% to 25% on $200bn of imports from China. As the outlook has clearly worsened, the price forecasts were revised down.
The market established a clear downward trend in May. Increased uncertainty over the global economy significantly lowered any expectation of a recovery. The price forecasts for the rest of 2019 were revised down substantially across all segments. Supply in the past few months experienced a rapid increase because of the additional global capacity which came onstream last year and the recent sharp decrease in demand.
The engineering resins markets in Europe will most likely continue to experience low demand in the next few months as activity is set to slow down in the summer amid increased uncertainty. However, worries over the global economy sinking into a recession could place enough pressure on China and the US to strike a deal in June. An ease in trade disputes will likely limit further decreases and set the markets up for a strong recovery in 2020.