Cyclohexane Prices Unmoved by Benzene Drop and Slow Downstream Sector

In the latter half of July 2024, Cyclohexane prices across the European market remained stable due to a balanced supply and demand dynamic. This stability persisted despite a significant 7% drop in feedstock Benzene prices during the same period.

In Germany, Cyclohexane supply levels were moderate, reflecting a decline in production and persistent low demand. The German manufacturing sector continued its downturn from the second quarter of 2024, with further contractions anticipated in the third quarter. Data from the Federal Statistics Office revealed an unexpected 2.5% decrease in industrial production in May, signaling ongoing challenges in Europe's largest economy. This decline contributed to subdued Cyclohexane production levels. Additionally, input prices surged significantly in July, with inflation rates reaching a three-month peak. This latest increase was also notably steeper than the average rate observed in the series. Cost pressures continued to be more pronounced in the service sector than in manufacturing sector, which led to the prices of Cyclohexane, receiving an upward influence. Production was down markedly in July, and to the largest extent in the year-to-date, which continued to keep inventories of Cyclohexane regulated.

Demand for Cyclohexane from the downstream paints and coatings industry, particularly within the construction sector, also remained tepid. Building permit data for May 2024 showed a substantial 24% drop compared to May 2023, following a 17% decrease in April. The total number of permits issued in May was approximately 17,800, reflecting a 44% plunge in apartment permits over the past two years. This decline further underscores the reduced demand for construction materials, including Cyclohexane.

Additionally, a recent incident at BASF’s Ludwigshafen production site—a leak of an organic solvent leading to an explosion and fire—has raised concerns about potential impacts on Cyclohexane supplies. BASF, a major European Cyclohexane producer, reported that the fire was extinguished by its fire department at around 12:45 PM CEST, and the plant has been secured. The cause of the fire is still under investigation.

Looking ahead, Cyclohexane prices are likely to be impacted by fluctuations in feedstock Benzene prices over the coming week. Demand from the downstream paints and coatings sectors is expected to remain subdued, as sentiment for foreign investments continues to wane. This will likely result in a lackluster trading environment across the Eurozone. Supporting this outlook, data from the Netherlands for Q1 2024 shows that prices for new-build homes were 1.4% higher than the previous year, driven by rising construction material costs. However, the average selling price dropped to just over 493,000 euros, marking a 1% decline, according to CBS Statistics. This trend underscores the ongoing slump in the European construction sector, with no significant recovery anticipated for the remainder of the year.