Bleak Demand Casts a Pall on Di propylene Glycol Mono Methyl Ether Projections in the US and Asia

During July, the Di propylene Glycol Monomethyl Ether (DPM) market experienced noticeably weak buying interest across the US and Asian markets. Most buyers have secured only their limited DPM needs and then retreated to the sidelines. The primary reason for this reduced demand, compared to July, was a lack of vivid downstream orders. Furthermore, the availability of DPM has been sufficient to meet the existing downstream demand which further weighed down the prices of DPM across the regional market. Looking ahead, prices of DPM are likely to remain soft across the regional market as manufacturers are not optimistic about the demand outlook for August.

DPM prices have been stable or hovering at a slightly lower end in the Chinese market on account of muted demand dynamics. The feedstock prices have showcased a mixed signal, Methanol prices have decreased which resulted in the low production cost of DPM in the domestic market while propylene oxide prices have been observed on the higher end throughout the month, but it had a minimal impact over the prices of DPM. Additionally, the manufacturing firms have been operating at stable rates in the domestic market. Also, in July China Manufacturing Purchasing Manager Index was observed below the threshold level that is below 50 reflecting the impact of off-season production, insufficient market demand, high temperatures, floods, and extreme weather in some areas as factors contributing to the decline. Also, dense fog and Typhoon Gaemi closed several Chinese ports last month, resulting in increased vessel waiting times. Despite all these factors, the level of inventories was adequate, keeping the prices downward in the domestic market. Thus, prices of DPM FOB Qingdao were settled at USD 1590/MT with a monthly decrement of USD 20/MT throughout July.

Moreover, demand for DPM from the downstream paints and coating industry has continued to remain tepid as consumption from the key end-user construction sector was slower than expected amid the property crisis, leading to the bearish market sentiments of DPM in the domestic market. According to the preliminary data from China Real Estate Information Corp., the value of new-home sales from the 100 biggest real estate companies slumped 19.7% from a year earlier to about 279 billion yuan ($38.6 billion), faster than the 17% decline in June. At the same time, export demand for DPM has also subdued amidst sluggish downstream demand. According to data from China Customs China’s exports increased 7.0% year on year to $300.6 billion in July, a slowdown from the previous month, adding to signs that the country’s economic growth is losing momentum amid the persistent weakness in the manufacturing sector.

Additionally, in the US market, DPM prices have significantly decreased in the US market during July 2024 on account of cheap import offers from the Asian market. The demand from the downstream paints and coating industry has remained subdued due to a decline in consumption from the construction sector, leading to a downward shift in the price realization of DPM. In addition, spot rates for shipping containers from China to the US dropped amid signs demand is cooling after US tariffs on Chinese goods and other trade disruptions sparked an earlier-than-usual peak season for restocking.

 In the short term, ChemAnalyst speculates demand from the downstream derivative industry is not expected to improve across the US and Europe which may drag down the prices of DPM. The feedstock Methanol and Propylene oxide prices are anticipated to decrease in the coming months which may ease the production cost of DPM in the regional market. On the other hand, the operating rates have remained under pressure in anticipation of a decline in downstream demand. Even though, the availability of DPM is expected to be sufficient it further weighs down the prices of DPM. On the other hand, freight charges from Asia to the US are likely to stabilize which may keep the import prices low.