The market situation of Diacetone Alcohol (DAA) has witnessed a stable trend in the US market during December 2023 due to largely stable prices of feedstock Acetone, which stagnated the production costs. However, a significant price surge of 60% was recorded in the prices of feedstock Acetone during the first two weeks of December 2023 due to low level of inventories amongst suppliers, which did not affect the prices of DAA.

The demand for DAA from the downstream paints and coating sectors of the construction industry continued to remain moderate, which kept the prices of the product stable. House building sentiments did not improve despite mortgage rates retreating to 6.61% and 5.53% for a 30-year contract and 15-year contract, respectively for the week ending December 28, 2023, according to Freddie Mac (Federal Home Loan Mortgage Corporation). Despite the declining mortgage rates, positive purchasing sentiments were simply not present as the housing market continued to remain undersupplied. Only existing house sales were recorded to have marginally appreciated by 0.8% in November, keeping the pressure low on the downstream paint and coating sector and further keeping the prices of DAA unaffected. This caused the builders to increase construction activities as indicated by increment of 0.4% in the spendings increasing the pressure on existing inventories of DAA.

Current economic conditions present a slight unfavorable situation in the US market as the PMI of United States remained in contraction continued with declining orders in December 2023. Inflation rates are expected to witness a slight increment due to positive purchasing sentiments largely prevail amongst the local populace mainly induced by the festive season.

The only demand for DAA existed from the automotive industry as major automotive players indicated healthy sales towards the termination of December 2023, despite official figures to be released in the upcoming week. Supplies of DAA were also recorded to moderate as inventories of feedstock Acetone were recorded to be limited in circulation and with manufacturing activities contracting for the sixth consecutive month. This generated enough supplies of DAA amidst moderate demand which consequently created a gap between demand and supply which kept the prices of the product unchanged.

Prices of DAA are further anticipated to increase as production costs are expected to increase due to increasing prices of upstream Crude Oil which begin to increase as supply restrictions imposed by key OPEC+ members continued to take effect with the rising demand of diesel and gasoline. Furthermore, limited supplies of feedstock Acetone are also expected to restrict the generation of ample inventories of DAA which is expected to create an undersupplied market.