Inadequate Procurement from the Terminal Market Drives Down NBR Prices in Germany

Hamburg, Germany:  Nitrile Butadiene Rubber (NBR) prices in the European market are declining, primarily due to sluggish demand from the automotive sector. Tight inflationary pressures further drive this decrease, influencing overall pricing dynamics. Additionally, the prevailing low TTF Natural Gas prices contribute to the downward trend in NBR prices. The reduced demand from the automotive industry, coupled with inflationary constraints and inexpensive gas costs, collectively create an environment conducive to the ongoing decrease in NBR prices. The recovery of the German automobile sector, which constitutes approximately 5% of the economy, is facing challenges due to the impact of the pandemic and disrupted supply chains.

The ChemAnalyst database has shown that the prices of NBR have declined USD 180 per ton on the week ending 11th August, compared to the prices observed at the start of August 2023. In June, the largest economy in Europe experienced a decline of 1.5% in its industrial production compared to May. A significant 3.5% contraction primarily influenced this downturn in Germany's extensive automotive industry. A decline in industrial production is contributing to an anticipated economic contraction in the German GDP during the second half of this year. In addition, the still high inflationary pressures have been impacting the purchasing power of the end-use industries on a broader level. Furthermore, Lanxess AG, a company specializing in chemicals, anticipates its pre-exceptional EBITDA for the second quarter will fall short of the average market predictions. The company has also revised its outlook for the entire calendar year 2023 to a more cautious stance. The company highlighted that the construction sector, electronics industry, and certain consumer products are experiencing reduced demand, impacting the company's capacity utilization and overall earnings.

On the other hand, the re-commencement of some NBR manufacturing units in Lanhua, China, has increased the NBR supply. However, the inquiries from the downstream Automotive industries were based on immediate requirements. The Chinese market has been grappling with low demand, which has significantly impacted NBR's market fundamentals. According to the data released by the General Administration of Customs, the overall imports, including NBR, were contracted by 12.4% in July on a y-o-y basis. Furthermore, Intense rainfall and flooding have affected not only the capital city of Beijing but also the neighboring Hebei province and the adjacent port city of Tianjin.

According to the pricing intelligence of ChemAnalyst, the NBR prices might progress in a downward trajectory in the coming terms amidst an expected drop in inquiries from the downstream construction and automotive sector. However, E.ON, a prominent German utility company, issued a caution that Europe might encounter winter price surges if an abrupt supply shortage aligns with colder temperatures, despite the overall stabilization of energy markets and notable reductions in wholesale natural gas prices, which further increase the pressure on the market fundamentals of NBR.