Global Salicylic Acid Prices Expected to Climb in June 2024 Due to Supply Constraints

The global prices of Salicylic Acid are expected to continue rising in June 2024, following the trend observed in the previous week. This increase is driven by several factors, including heightened Salicylic Acid demand from end-user industries, rising prices of raw material, and a tight market supply. Additionally, market participants have been quoting higher prices for Salicylic Acid, which has bolstered overall market sentiment.

In June, domestic resources remained constrained, and the market price of phenol, a crucial raw material for Salicylic Acid, was on the rise. This price hike provided strong market support, with minimal supply pressure. Sellers set high opening prices to push the market upward, and buyers responded actively. Consequently, this could lead to a rise in the manufacturing cost of Salicylic Acid, further contributing to its upward price trajectory.

New figures indicate that manufacturing activity in China experienced a sharper slowdown than anticipated in the month of May, hitting its lowest level in three months. This downturn mirrors the substantial structural obstacles confronting the world's second-largest economy. The official manufacturing Purchasing Managers' Index (PMI), a gauge of factory owners' sentiment, dipped below expectations to 49.5, down from 50.4 in April, according to data published by the National Bureau of Statistics. This manufacturing slump has resulted in a constrained supply within China's domestic market, potentially driving up prices for Salicylic Acid.

Given China's status as a major exporter of Active Pharmaceutical Ingredients (APIs), Western markets for Salicylic Acid are likely to witness a similar trend.

Starting in June, the costs associated with transporting goods to Europe and the United States will escalate as shipping companies implement surcharges to offset the increased expenses incurred from rerouting vessels around the Cape of Good Hope. Hapag Lloyd, a prominent German shipping company, will levy a Peak Season Surcharge (PSS) of $1,000 per container on shipments originating from India and West Asia destined for the North American West Coast. Similarly, shipments from India to the US East Coast and Gulf Coast will be subject to a PSS of $500 per container. These additional fees will translate into higher product prices for consumers, further fueling the upward trajectory of Salicylic Acid costs.

Moreover, the peak shipping season in 2024 is commencing earlier than normal, driven by multiple factors. Among these are retailers replenishing their stocks after robust sales, aiming to stay ahead of impending tariff hikes on Chinese goods scheduled for August, and securing ample inventories to meet the anticipated strong consumer demand during the holiday period. These contributing factors could further exacerbate the upward pressure on Salicylic Acid prices.

The ChemAnalyst's assessment indicates that the feedstock phenol market is likely to sustain elevated price levels in the near term, consequently bolstering the Salicylic Acid market. However, this outlook is susceptible to several potential risks, including uncertain economic prospects for advanced economies, geopolitical upheavals, the escalating Middle East crisis exacerbating the situation in the Red Sea region, and deepening geo-economic fragmentation. These external factors introduce uncertainties and potential challenges that could shape the trajectory of Salicylic Acid prices in the coming periods.