Weaker EU automotive outlook forces change in petrochemical strategies

A slowdown in the European automotive sector has weakened sentiment among a range of petrochemical products, according to ABS, synthetic rubber and R-HDPE suppliers.

Western and Central EU car sales are forecast to fall 0.7% year-on-year in 2025 to about 15 million units, according to a March report from S&P Global Mobility. The weaker market was also expected to hit production with auto output forecast to fall to around 16.7 million units in 2025 from about 17.2 million in 2024, before rebounding slightly in 2026 to around 17 million, S&P Global Mobility said.

"Trade conflicts and in particular additional tariffs and sanctions could significantly affect global trade flows and corporate activities. Sharply rising energy and raw material prices, higher than expected inflation rates and interest rates, possible distortions in the financial markets, and a pronounced weakening of economic activity can also have an impact on the development of the global economy and the automotive markets," the Mercedes-Benz Group said in its earnings call Feb. 20.

The decrease in demand and increase in uncertainty are impacting the region's petrochemical markets.

Rubber producers reduce output

Market participants in the European rubber market, a key commodity used in tire production, said that consumers are hesitant to purchase materials.

The average light vehicle contained 231 pounds of synthetic rubber and elastomers in 2023, according to a May 2024 report from the American Chemistry Council.

As a result, butadiene rubber producers have opted to only manufacture enough polybutadiene rubber (PBR) to fulfill their contracted volumes with no additional spot material. "There is no point in producing spot PBR if no one is buying it, and no one wants to have excess stock," said a rubber trader.

The lack of buying activity in the automotive sector has resulted in some rubber players opting to diversify their portfolios and enter the construction or consumer goods markets.

Despite low demand, prices in the spot styrene butadiene rubber (SBR) market have risen since the start of the year due to increasing feedstock prices.

Platts assessed SBR 1500-1502 grades FD NWE at Eur1,960/mt on March 21, up Eur160/mt from Jan 10.

ABS producers focus on the white goods market

The automotive market is also a key industry for ABS, with this polymer accounting for 24 lb/vehicle, according to ACC data.

The ABS and recycled ABS market has also seen very little buying appetite for automotive applications. "There is a lot of theoretical demand for recycled ABS in automotive applications, but no one is buying it. The automotive market is very weak," an ABS producer said.

An ABS distributor said that they don't expect the automotive market to recover until Q4 2025 at the earliest.

This has pushed ABS producers and distributors to shift their focus to so-called white goods or large appliances like refrigerators, dishwashers or laundry machines, which have been reported to see stronger demand. Multiple producers cited increased demand for virgin and recycled ABS in the production of white goods at the start of the year, pushing up prices.

Platts assessed general purpose ABS at Eur1,800/mt FD NWE on Jan. 15 up Eur80/mt from Jan. 8 and prices have been stable at that level through March 19, Platts data shows.

Weak R-HDPE demand leads to oversupply

The automotive slowdown has also hit the European recycled high-density polyethylene market.

While vehicle manufacturers had previously considered using R-HDPE materials in the production of car door handles, recyclers and distributors have said that automotive demand has been weak for this market throughout Q1 2025.

This has led to an oversupply of R-HDPE materials, and prices have fallen in since the start of the year.

Platts assessed recycled HDPE natural pellets FD NWE at Eur1,630 on March 25, down Eur180/mt from Jan. 2, and recycled HDPE light pellets FD NWE were assessed at Eur1,140 on March 25, down Eur50/mt from Jan. 2.

A distributor said the weak R-HDPE market was compounded by a lack of pull from the gardening and construction sectors.

Platts is a part of S&P Global Commodity Insights.