Propionic Acid Prices Show Improvement Amid High Feedstock and Strong Downstream Demand in US

Louisiana (USA): In February 2024, the price of Propionic Acid in the domestic US market continued its upward trajectory, driven by multiple factors. The surge in feedstock ethylene prices, stemming from the shutdown of several global plants, played a significant role. Additionally, heightened demand in downstream food industries and geopolitical tensions leading to increased crude oil prices further fueled the escalation in Propionic Acid prices. Notably, China's record import of crude oil during the spring season contributed to the overall rise in crude oil prices, subsequently impacting Propionic Acid costs. Both WTI and Brent benchmarks reached their highest levels in over two months, exerting additional pressure on Propionic Acid production costs. Furthermore, increased demand from the food industry, a primary consumer of Propionic Acid, served as an additional driving force behind the price surge.

The Propionic Acid market in the domestic US exhibited a bullish trend, primarily fueled by robust demand from the downstream food industry. The surge in demand was in response to escalating food prices, which saw a notable increase of 1.0% in February, contributing to a 0.6% rise in producer prices, as indicated by the Labor Department's Bureau of Labor Statistics. This uptick in food costs, coupled with increases in other commodities like gasoline, drove the need for preservatives such as Propionic Acid, consequently driving up its price. The optimistic market sentiment led to enthusiastic buying activities domestically. Furthermore, strong international demand for U.S. agricultural products further bolstered the necessity for effective preservation methods like Propionic Acid in the global market. As the agriculture sector underwent a phase of recovery and adaptation, Propionic Acid played a pivotal role in ensuring feed quality and maximizing yields, underscoring its crucial contribution to agricultural productivity and food security.

Additionally, several ethylene feedstock plants globally, including prominent entities like Sinopec - Kuwait Petroleum Corporation, Sinopec Guangzhou Petrochemical, Liaocheng Meiwu New Materials, and Sinopec Maoming Petrochemical in China, along with LyondellBasell, Royal Dutch Shell, and Chevron Phillips globally, underwent shutdowns. These shutdowns, prompted by factors such as adverse weather conditions and operational issues, disrupted the ethylene supply chain, resulting in a shortage in the region. Consequently, ethylene feedstock prices surged, leading to an increase in the production cost of Propionic Acid and subsequent price hikes. Despite these challenges, manufacturing activities remained active throughout February, indicating heightened trading activities and improved demand. The assessed price of Propionic Acid reached USD 745/MT DEL Louisiana in February 2024, marking a 2.7% increase from the previous month.

According to ChemAnalyst data, the price of Propionic Acid is expected to decrease in March 2024. This anticipation stems from the resumption of operations in numerous feedstock ethylene plants, which is expected to result in smoother supply chains. Additionally, the demand in China has declined following the Lunar New Year holidays, which may have a ripple effect on global demand. Consequently, the demand for Propionic Acid in the food industry is forecasted to decline, exerting downward pressure on its price.