European Acrylic Acid Market Faces Bearish Trends Amid ECB Rate Cuts

Hamburg, Germany: The European Acrylic Acid market has been experiencing a prolonged bearish trend, primarily driven by a reduction in production costs due to declining feedstock Propylene prices. This cost relief has been accompanied by weaker demand from key downstream sectors such as Coating and Construction, which have faced challenges like subdued activity and slower project rollouts. The soft demand from these sectors, combined with lower input costs, has contributed to oversupply conditions in the market, exerting downward pressure on Acrylic Acid prices and sustaining the bearish outlook.

In Germany, the Acrylic Acid market witnessed a 1.58% decline by the week ending October 18, 2024, settling at USD 1240/MT (FD-Hamburg). This drop was driven by the weak performance of the downstream Coating and Construction sectors, which have curbed demand for Acrylic Acid. Market participants remain cautious, trying to avoid further price deterioration in the broader European market. The construction industry in Europe, though significant, has been slow to innovate and remains fragmented across different players involved in project lifecycles. With operational profitability for major companies hovering around 5%, there’s little room for experimentation with new technologies. However, construction startups are actively attempting to innovate, with €390 million already invested in 62 construction tech deals by mid-October, indicating a push toward modernizing the sector, despite ongoing challenges.

On October 17, 2024, the European Central Bank (ECB) implemented a second consecutive interest rate cut, reducing its benchmark deposit rate by a quarter-point to 3.25%, following a prior cut in September. This decision reflects a faster-than-expected cooling of inflation within the eurozone, as the ECB seeks to ease monetary conditions amid weakening economic momentum. The rate had previously peaked at 4%, but the ECB expects inflation to rise temporarily before stabilizing at its 2% target by next year. The rate-setting committee, meeting in Slovenia, has now cut rates three times since reaching the peak, demonstrating its focus on supporting growth as inflation moderates.

However, the European Acrylic Acid market continues to face a persistent decline, largely due to a reduction in new orders for Acrylic Acid from downstream sectors such as Coating and Construction. The subdued activity in these industries, driven by weaker demand and sluggish project rollouts, has negatively impacted the consumption of Acrylic Acid. This downturn in demand, coupled with lower production costs, has contributed to a prolonged bearish trend in the market, leaving market players cautious about the future outlook.

According to ChemAnalyst, the European Acrylic Acid market is expected to maintain its bearish trajectory due to the ongoing weak performance of downstream sectors such as Coating and Construction. However, the recent interest rate cut by the European Central Bank (ECB) could lead to a slight upward shift in the market. With lower borrowing costs potentially stimulating activity in the construction sector, the demand outlook for Acrylic Acid may improve, offering a modest rebound in market sentiment despite the broader challenges. This shift, while cautious, reflects the potential for renewed demand for Acrylic Acid as economic conditions evolve.