July 2024: German PU Resin Suffers a Setback as Demand Conditions Remain Unfavourable

As of July 2024, the German PU Resin market has continued to face a bearish trend, with prices declining by approximately 1.5% due to a drop in TDI prices and easing demand conditions. On a monthly basis, PU Resin prices have decreased by about 1.6%, reflecting a broadly negative market sentiment driven by a persistent downturn in the construction sector. Germany’s manufacturing sector encountered a fresh setback at the end of Q2, with rates of contraction in both output and new orders accelerating after having eased substantially in May. Additionally, the destocking cycle showed no signs of reversing, as firms reported worsening declines in pre- and post-production inventories, underscoring the oversupplied nature of the market.

The primary factor affecting the German PU Resin market was the 1.5% depreciation in TDI feedstock prices, which eased production costs. The ongoing weakness in demand has continued to exert downward pressure on input costs and factory gate charges, evident in the falling prices of PU Resin. During the first half of the year, suppliers’ delivery times improved significantly, with a notable acceleration in June 2024, as the destocking cycle eased and material availability increased. Production fell more sharply in June following a minor decline in May, driven by deteriorating performances across major industrial sectors—consumer, intermediate, and investment goods. This downturn coincided with a significant and accelerated reduction in total new orders, reflecting pessimistic procurement sentiments of PU Resin amid challenging exporting conditions, particularly due to security issues at the Red Sea.

Demand of PU Resin from the construction sector remained weak. Purchasing activity among builders fell again in June, signalling low demand for PU Resin and a reduction in building materials use, which led to improved supplier capacity and faster delivery times. Intense competition among suppliers continued to drive down input costs, contributing to a third consecutive month of decreasing purchase prices. The construction downturn was evident in the housing market, where prices dropped by 5.7% year-on-year. Major cities such as Berlin, Hamburg, and Munich saw the steepest declines, with single and two-family homes falling by 9.5%, while apartments decreased by an average of 4.6% over the year. In less populated regions, prices for detached and semi-detached houses fell by 6.7%, and apartments saw a 2.4% drop, reflecting diminished consumption of PU Resin as foreign investors hesitated to invest in the construction sector. Statistics Deutschland reported a 5.7% decrease in residential property prices for Q1 2024 compared to the previous year, marking the sixth consecutive quarter of price declines. Compared to Q4 2023, residential properties were 1.1% cheaper at the start of 2024, highlighting ongoing challenges in the housing market and contributing to low PU Resin consumption.