German DEG Prices Remain Stable in Early July Amid Balanced Feedstock Costs and Moderate Demand

In early July 2024, Diethylene Glycol (DEG) prices in the German market exhibited stability, underpinned by ample supply and balanced feedstock costs. Ethylene Oxide, a crucial feedstock, maintained steady pricing after a 2.2% decline the previous week, contributing to the stable price of DEG. Demand for Ethylene Oxide from downstream DEG industries remained persistently low as market participants braced for a summer slowdown due to seasonal holidays. Spot market transactions were also quiet, with buyers remaining cautious.

In a broader economic context, German inflation decreased more than anticipated in June, continuing its downward trend after two months of increases. This development could pave the way for another rate cut by the European Central Bank in September. However, the cost of Ethylene consistently rose, leading to higher domestic production costs for Ethylene Oxide. Meanwhile, the Energy Information Administration (EIA) reported a decrease of 3.4 million barrels in U.S. commercial crude oil inventories, bringing the total to 445.1 million barrels, slightly below the five-year average. Despite this, West Texas Intermediate crude oil prices rose to USD 84.44 per barrel by July 5, 2024, up USD 1.61 from the previous week and USD 10.53 year-on-year. Brent crude prices also increased by 1.3% to USD 88.02 per barrel during the same period.

Demand for DEG from downstream resin manufacturing industries remained average, supported by active procurement and balanced demand patterns. This stability was further bolstered by moderate DEG consumption rates and stable consumer confidence. At the beginning of the month, consumer confidence in Germany remained steady, contributing to consistent DEG demand from resin manufacturers. Additionally, late in June, statistics from Bundesamt indicated a continued decline in residential property prices (house price index) in Germany, with an average drop of 5.7% in the first quarter of 2024 compared to the first quarter of 2023. This marked the sixth consecutive quarter of price decreases. Residential property prices also fell by 1.1% on average in the first quarter of 2024 compared to the fourth quarter of 2023, indicating lower resin consumption.

On the supply side, DEG availability in Germany remained stable, supported by favorable operational rates and ample feedstock for DEG. However, DEG domestic production operated at reduced rates to balance the underperforming downstream demand. At the same time, Logistics companies assessed vessel line-ups and schedules at the Wilhelmshaven terminal due to strikes initiated by the trade union ver.di. These strikes, part of ongoing negotiations for higher wages and bonuses, affected operations at the Container Terminal Wilhelmshaven. The union sought a €3 per hour wage increase from June 1, along with enhanced shift bonuses and a 12-month term for the new collective agreement. Logistics firms managed potential disruptions to vessel departures and advised customers to expect delays and adjust their logistics plans accordingly.

In conclusion, analysts anticipate that DEG prices are likely to experience a slight downward trend due to ample supply and muted downstream demand for DEG in the coming week.