Tokyo (Japan): In March 2024, the Methyl Ethyl Ketone (MEK) market in Japan underwent a pronounced downturn, closely mirroring the sluggish demand observed in downstream industries such as paint, coating, and others, predominantly due to a marked slowdown in the construction sector. This trend was further exacerbated by the enduringly low prices of feedstock butanol and natural gas, which effectively contributed to reduced MEK production costs amidst a persistently sluggish economic climate. Further, Japan's manufacturing in March also remains low, signifying weak customer demand both domestically and internationally, persisted, creating a notably challenging market landscape for MEK and its associated products within the paint and coating industry.

Data indicating a continual drop in housing starts, coupled with an uptick in the number of vacant homes due to Japan's aging population and declining birth rates, underscored the stagnation in construction activity, prompting market participants such as Maruzen Petrochemical Co., Ltd. in Ichihara City, Chiba, to exercise caution by operating at lower run rates amidst declining indicators in home buying, financing, and construction starts for real estate firms. Despite geopolitical tensions and refinery outages in Russia from Ukrainian drone attacks leading to a slow but steady increase in upstream crude oil prices, the MEK market continued to follow a bearish trajectory. Rising concerns in the Middle East regarding potential attacks on Saudi refineries by Iran-backed Houthis also impacted upstream crude oil prices. However, MEK prices remained subdued owing to low downstream demand and reduced production costs resulting from the low feedstock prices of butanol and natural gas. As of March 2024, the assessed price for MEK stood at USD 1097/MT FOB Osaka, reflecting a 6.1% decline compared to the previous month.

The domestic demand market for MEK has shown an overall poor performance. There has been a gradual weakening of export order support, leading to a decline in downstream paint and coating demand for MEK. Consequently, the market has begun to experience the effects of reduced demand, resulting in increased supply pressure. Additionally, Japan's housing starts have continued to decline for the eighth consecutive month in January 2024, dropping by 7.5 percent year-on-year, according to data from the Ministry of Land, Infrastructure, Transport, and Tourism. Notably, new construction projects have contracted, as evidenced by a decline in the seasonally adjusted annualized number of housing starts to 802,000 in January from 814,000 in the previous month, indicating a slowdown in construction activity.

Looking ahead, ChemAnalyst predicts a forthcoming rise in MEK prices, driven by anticipated improvements in demand from both domestic and international markets. This forecast is substantiated by the Japanese government's concerted efforts to bolster the construction sector, expected to positively impact MEK prices in the near term. Such initiatives, aimed at reviving construction activity, are anticipated to fuel increased demand across various industries, thus potentially reversing the current downtrend in the MEK market.