Falling Mortgage Rate in US Plunges Demand and Prices of Butanediol

Butanediol prices in the US market continued to slump as the demand outlook for the commodity from paints, coating, polymers, resins, and PBT producing and consuming manufacturing units. Accompanying the weak demand outlook, the decreased production cost due to the weak feedstock (maleic anhydride, benzene) prices governed the overall price dynamics of Butanediol. Additionally, the continuous drop in the WTI crude oil and naphtha prices in the US market headed to the final selling prices of Butanediol. On the week ending November 17th, Butanediol price quotations were observed at USD 1628 per MT, FOB Texas.

The average interest rate for the most popular US home loan dropped to its lowest point in two months in the preceding week, showcasing its impact on the overall demand outlook for Butanediol. This decline is attributed to decreasing Treasury market yields, which serve as a reference for mortgage rates in the domestic market. The mortgage's average contract rate fell by 20 basis points to 7.41%, according to data from the Mortgage Bankers Association (MBA). This marks a 45 basis point decrease over the past two weeks, bringing the rate to its lowest since late September. The reduction is linked to diminishing inflation and a weakening economy, as faced by the country from the start of the last quarter of 2023.

Both indicators have experienced a third consecutive weekly decrease, and this trend coincides with indications suggesting that the Federal Reserve is not inclined to implement additional interest rate hikes. Subsequently, policymakers have conveyed that they would consider raising interest rates only if efforts to manage inflation encounter setbacks. These factors have suppressed the buyers from placing higher orders for Butanediol.

The Market Composite Index by the Mortgage Bankers Association, an indicator that tracks mortgage applications for home buying and existing loan refinancing, rose by 3.0% from the week prior, hitting a peak not seen in the past six weeks. Despite the decrease in rates, purchase applications are significantly lower than usual, suggesting that potential buyers of Butanediol are still hesitant and waiting on the sidelines.

As the year-end approaches, optimism persists among market bulls, especially following the release of US inflation data, which was lower than anticipated. This development eased investors' concerns regarding persistently high prices and raised hopes that the Federal Reserve might halt its trend of raising interest rates. As per ChemAnalyst, Butanediol prices are expected to follow the steadiness in the US market as the demand for the commodity is anticipated to remain weak, showcasing its impact on the price range of Butanediol.