Bearish Trends in Para Phenylene Diamine in South Korean and USA Markets Amid Supply Disruptions in December 2023

During December 2023, the prices of Para Phenylene Diamine (PPD) showcased a decline in its trend in the South Korean and the USA markets due to the disruption in supply and demand equilibrium. Furthermore, the fluctuations in the prices of its upstream Aniline and Nitrobenzene market contributed as one of the factors for the bearishness in the market of PPD.

In the South Korean market, trading in major manufacturing sectors has slowed down due to abundant stocks among the storage units. Producers have responded by reducing production to avoid a surplus of commodity. However, the decreased demand from the downstream automotive industries has led to an oversupply, causing prices to decline. According to Statistics Korea, the Consumer Price Index was 112.71 in December 2023, remaining unchanged from the previous month but showing a 3.2 percent increase from the same period the previous year. The Purchasing Managers' Index (PMI) for South Korea also declined in December 2023 compared to November 2023.

A surplus in the market coupled with diminished demand created downward pressure on prices. Striking a balance between supply and demand became crucial to maintaining a stable and healthy market environment. In the upstream market, the prices of the crucial precursor, Aniline, decreased, while Nitrobenzene experienced an upward trend. The weakened demand from the downstream automotive industry posed challenges for market participants in maintaining their profit margins, leading them to sell their inventories at reduced profitability. Regarding the spread between PPD and its feedstocks, a slight difference was observed, signaling a prevailing pessimistic sentiment in the PPD market.

Similarly, In the US market, a 1.2% decline was registered in the price trend of PPD, attributed to reduced demand from downstream automotive industries and an upswing in PPD inventory levels. Disruptions caused by a Yemen-based Houthi attack in the Red Sea led to delays in shipments from China to the USA. To navigate these challenges, ships were rerouted around the Cape of Good Hope, resulting in an additional 9-10 days for shipments. The Xenata shipping index reported a 5.619% rise in ocean freight charges. The US Manufacturing PMI for December 2023 was lower than the November 2023 PMI, indicating a more significant deterioration in manufacturing conditions. Output declined again, and the deceleration in new orders intensified, reflecting weakness in both domestic and external demand. Consequently, businesses adjusted their input buying and hiring activities. Along with the sufficient inventory level of PPD in the storage facilities, the price of its upstream Aniline market was recorded to be declining. This resulted in lower operational costs for PPD, contributing to the downward price trend. In terms of the spread, the difference between PPD and its feedstock, Aniline narrowed representing the bearish market situation for PPD.

As per ChemAnalyst, despite the disruption in the shipments of the commodity through the Red Sea and delaying the shipments, the prices of PPD are anticipated to decline due to sufficient inventory levels but lower demand from the downstream automotive sector. This market situation may force the market players to clear out the inventories at a lower rate.