Global Paraffin Wax Prices Plunge in Early August Due to Weak Demand and Falling Raw Material Costs

Paraffin Wax prices plunged by a significant margin in the global market during the week concluding on August 2nd. This price dip is attributed to a combination of factors including the declining price of essential feedstock Crude Oil. The U.S. Energy Information Administration (EIA) reported a significant increase in crude oil inventories, which has contributed to a reduction in production rates. This increase in inventory levels has exerted considerable downward pressure on the prices of Paraffin Wax, as producers adjust to the shifting cost structure of raw materials. Further, slight ease in the freight charges in the global market and slight ease in port congestion during the current period in review has led to smooth and cheaper inflow of cargoes, further supporting the current price dip.

In the European region, imported Paraffin Wax prices continue to decline. The alleviation of congestion at Asian ports and the reduction in freight rates have facilitated a smoother flow of cargo to the European market, resulting in ample inventories of Paraffin Wax. Average spot rates for shipping from the Far East to the U.S. West Coast and East Coast have softened, with declines of 17% and 3.2%, respectively, since July 1. Further spot rates from China to Northern Europe have declined by 8% during this week although freight rates from China to South Europe held relatively steady, they have also decreased slightly by 1.6% since July 31. These factors have contributed to a well-supplied market, ensuring that Paraffin Wax remains readily available in Europe and globally.

Concurrently, demand for Paraffin Wax in European markets remained somewhat restricted, despite the upcoming festive season, which traditionally boosts market activity. For several weeks, the demand for Paraffin Wax has been subdued, reflecting ongoing challenges within the domestic market. In the candle-making industry, demand has remained consistent, providing some stability to the Paraffin Wax market. However, the cosmetics sector continues to experience muted demand. Several factors contribute to this trend, including shifts in consumer preferences and economic conditions affecting discretionary spending on cosmetic products.

In like manner, in the Asian market the Paraffin Wax prices dipped with China being the most affected country. Domestic demand for Paraffin Wax within China has remained subdued. Notably, major cosmetics brands such as L’Oréal and Maybelline reported an unexpected slump in sales within China during July, despite experiencing growth in the global market. This downturn in sales has subsequently decreased the demand for Paraffin Wax, a key ingredient used in various cosmetic products. Additionally, insights from various market participants indicate that China's manufacturing activity fell to a five-month low in July. Factories have been grappling with declining new orders and lower prices, suggesting a challenging economic environment. The National Bureau of Statistics (NBS) released data showing a decline in the manufacturing Purchasing Managers' Index (PMI), which dropped from 50.6 in June 2024 to 50.1 in July 2024. This decline reflects weakening manufacturing conditions and is expected to continue decreasing in the coming months.

According to ChemAnalyst, it is anticipated that global Paraffin Wax prices may experience a decline in the upcoming months. This forecast is largely due to an anticipated decline in purchasing activity during the monsoon season, which traditionally reduces demand. Additionally, a potential reduction in raw material costs is expected to contribute to lower Paraffin Wax prices, as reduced input costs often lead to corresponding decreases in finished product prices.