Diacetone Alcohol Prices Gains Stability in the US Market in Early May 2024

In the opening weeks of May 2024, Diacetone Alcohol (DAA) prices in the US market-maintained stability, primarily attributed to the equilibrium between supply and demand. Sluggish demand was observed within the construction sector, particularly from the downstream paints and coating industries, a key consumer of DAA, as evident from the reduced expenditure reported by the US Census Bureau for March 2024. Concurrently, with mortgage rates on an upward trajectory, projections hinted at further contraction in construction spending for April 2024, although official statistics had not yet been released. This compounded the already weakened demand for DAA from downstream sectors like paints and coatings.

March 2024 witnessed a slight dip in construction spending compared to February figures. Private construction saw a 0.5% decline, while residential construction experienced a 0.7% downturn. Similarly, nonresidential construction faced a marginal decrease of 0.2%, according to US Census Bureau data. By May 2024, the rising trend in mortgage rates, reaching 6.47% and 7.22% for 15-year and 30-year fixed terms respectively, was anticipated to dissuade potential homebuyers, thereby further dampening the demand for DAA.

Despite the deceleration in private and residential construction, public construction demonstrated resilience, with expenditure increasing by 0.8% in March 2024. Particularly notable was the growth observed in segments such as educational and highway construction, which served as a lifeline for DAA demand from paints and coating industries.

On the manufacturing front, the US manufacturing sector faced a setback in April, with new orders declining for the first time in 2024, thereby keeping supplies of DAA under regulation. Despite this, ongoing work on existing projects helped maintain growth in production, while businesses continued to hire additional staff, partly due to optimistic expectations for the near future. In response to reduced new orders, manufacturers scaled back their purchasing activities, leading to a decrease in pre-production inventories. Although the rate of output price increases slowed down, there was a notable acceleration in input cost inflation for DAA, hinting at sustained upward pressure on selling prices in the near term.

Looking ahead, the forecast of continued mortgage rate hikes and their impact on construction spending, coupled with the divergent performance of public construction, presents a mixed outlook for the DAA market in the coming months. Firstly, increasing prices of Acetone are expected to increase production costs of the product but with the mortgages rates continuing to increase, the potential prospective pool of homebuyers is expected to diminish, which is expected to hurt the demand of DAA from the downstream paints and coating industries.