PPD market oscillated in South Korea and the USA due to supply/demand disruption

Busa, South Korea: During January 2024, the prices of Para Phenylene Diamine (PPD) experienced fluctuations in both the Asian and North American markets. In South Korea, prices rose due to increased demand from the Automotive and Tire sectors, coupled with insufficient existing inventories. Conversely, in the US market, prices declined due to high inventory levels and sluggish demand from the downstream sectors. In the preceding year, China surpassed Japan as the leading global vehicle exporter, according to data from the Japan Automobile Manufacturers Association (JAMA). Japan exported 4.42 million vehicles in 2023, while China exceeded this with 4.91 million vehicles, as reported by the China Association of Automobile Manufacturers (CAAM) this month.

In South Korea, the PPD market witnessed an incline of 13% and reached USD 3150/MT (FOB-Busan) on 26th January 2024. Due to robust demand of PPD from the downstream automotive and tire sectors and inadequate inventory levels to meet this demand, the production rate of the PPD was increased, and trading activities among major manufacturing units were intensified. Additionally, the Purchasing Managers' Index (PMI) of South Korea in January 2024 showed expanded compared to December 2023, indicating an overall increase in the production of manufactured goods in South Korea during the initial month of 2024. According to Statistics Korea, the Consumer Price Index (CPI) in South Korea increased from 112.71 points in December 2023 to 113.15 points in January 2024. The existing inventory levels fell short of meeting the growing demand from the downstream automotive sector. Despite the decline in prices for feedstock of PPD, such as Aniline and Nitrobenzene, the commodity exhibited an upward trend, primarily influenced by the strong PPD market. The bullish market conditions provided an opportunity for market participants to increase their Ex-quotations, thereby enhancing marginal profits. In response, buyers actively participated in bulk procurement activities to meet the growing demand from the downstream automotive and tire sectors. Focusing on the spread, the difference between the end product and its feedstock widened showcasing the bullishness in the PPD market.

At the same time, the US PPD market fell due to lackluster demand and slow market offtakes. After a record-breaking 2023, January 2024 proved challenging for the economy, marked by economic difficulties and fluctuating interest rates that created a tough retail environment. The increased inventory levels of PPD led to a continuous rise in the average advertised discount of vehicle listings, contributing to a bearish trend in the PPD market in the USA. Despite marginal overall growth, the PMI of the US in January 2024 showed improvement compared to December 2023, driven by a resurgence in new orders and a slower contraction in output. However, production faced obstacles due to a renewed decline in supplier performance and extended delivery times for inputs. Rising transportation costs further contributed to increased input prices, causing cost inflation to reach a nine-month high.

Despite shipment delays caused by the Red Sea crises and rerouting of cargo via the Cape of Good Hope, market participants were forced to reduce their Ex-quotations and extend offers to buyers to encourage increased purchases of PPD for inventory clearance. However, buyers opted for on-demand purchases instead of bulk procurement in response to the challenging scenario. Meanwhile, in the upstream market, Aniline prices followed a downward trend, providing cost support to PPD by lowering production costs. Additionally, trading activities from the Chinese market to the US market were slowed down to prevent further accumulation of inventories.

As per ChemAnalyst, the prices of PPD are anticipated to decline due to the expectation of inventory accumulation and lower demand from the downstream Automotive and Tire sectors. Therefore, the prices of PPD might witness a decline in its trend in the upcoming weeks. Since the trading activities among the domestic as well as overseas markets were done at a higher rate, then the further possibility is the accumulated inventory levels which might lower the prices for PPD.