Liquid Paraffin Market Swings: Q2 2024 Sees Varied Price Trends

The global market for Liquid Paraffin, a versatile petroleum-derived substance widely used in cosmetics, pharmaceuticals, and industrial applications, witnessed notable price fluctuations throughout the second quarter of 2024. Both major importing and exporting regions of Liquid Paraffin experienced varying trends, influenced by a complex interplay of economic factors, geopolitical events, and industry-specific dynamics.

The quarter began with a considerable price increase of Liquid Paraffin that persisted until late May 2024. This upward trend was particularly pronounced in India, Asia's third-largest economy and a significant player in the global Liquid Paraffin market. The surge was primarily attributed to robust demand across various sectors, including cosmetics, pharmaceuticals, and nutraceuticals. India's manufacturing sector, despite a slight moderation in growth during April, maintained a strong performance. New orders saw significant growth, with domestic demand outpacing export orders.

The supply side faced challenges during this period. While availability remained sufficient to meet demand, manufacturers grappled with elevated costs driven by fluctuating market dynamics. These increased expenses were largely passed on to consumers, resulting in higher prices for Liquid Paraffin products. Crude oil prices, a key determinant of Liquid Paraffin production costs, saw consistent rises in April due to ongoing supply constraints. India's crude oil market saw a consistent rise due to ongoing supply constraints from shipping issues and Saudi Arabia's reduced supply announcement. The country received about 1.25 million barrels per day, down 9% from March, reflecting impacts from OPEC+ production cuts worsened by geopolitical tensions. OPEC+ plans to maintain a 2.2 million barrels per day output reduction post-2Q24. Geopolitical tensions including, including the Iranian President's death, initially raised supply disruption and OPEC+ production cuts contributed to this trend. India, which imports over 85% of its oil, felt the impact of these global market conditions.

As the quarter progressed, the market showed signs of stabilization in May, particularly in the Liquid Paraffin segment in India. Both domestic and import prices of Liquid Paraffin saw a notable rise, benefiting local manufacturers and suppliers. This trend was driven by high crude oil prices, enhanced demand from end-user sectors, and disruptions in global trade flows. However, June marked a turning point, with prices of Liquid Paraffin beginning to decline. This shift was influenced by several factors: the US Federal Reserve's commitment to high interest rates to control inflation, which dampened economic activity and oil demand; geopolitical tensions that, while present, did not escalate further, reducing the risk premium on oil prices; OPEC+'s decision to gradually phase out production cuts from October onwards, signaling potential oversupply in the oil market; and high crude oil production and increasing stockpiles in the United States, which contributed to downward price pressure.

Importing regions experienced more pronounced price decreases of Liquid Paraffin towards the end of Q2. This decline was attributed to shifting global supply trends, lower production costs in key manufacturing countries, and changing domestic market conditions. The situation led to delayed purchases as international buyers postponed orders, anticipating further price drops. Companies also liquidated stockpiled inventories to reduce storage costs and mitigate spoilage risks, which increased market supply and contributed to a supply-demand imbalance, further driving prices down.

As Q2 2024 concluded, the Liquid Paraffin market faced a challenging environment. The rapid price fluctuations highlighted the sector's vulnerability to global economic conditions, energy prices, and shifting supply-demand dynamics. Industry experts forecast continued price pressures in the near term, with the market struggling to regain upward pricing momentum. For both importers and exporters, these fluctuations underscore the need for adaptive strategies to navigate the volatile market landscape. As the global economy continues to evolve, stakeholders in the Liquid Paraffin industry must remain vigilant and responsive to emerging trends to maintain their competitive edge.