Rising Costs and Supply Chain Woes: Salicylic Acid Prices Set to Surge

Salicylic Acid prices are expected to rise globally in August 2024 due to several key factors. Increased demand from the cosmetic, healthcare, and pharmaceutical industries, along with ongoing supply chain disruptions and a constrained market supply, are driving this trend. As a result, market participants are likely to raise Salicylic Acid prices to enhance profit margins, fostering an overall positive market outlook.

In China, the prices of Phenol, a crucial raw material for Salicylic Acid, have remained elevated in the domestic market. According to market sources, the Phenol market in East China recently experienced an uptick due to a temporary supply shortage. In July, Jiangyin Port reported low Phenol inventory, leading to tight spot supply. Traders responded by increasing prices, although end-user demand has been cautious, further supporting the upward trajectory of Salicylic Acid prices. As China is a major exporter of Salicylic Acid, similar trends are anticipated in the USA and European markets.

Salicylic Acid production heavily depends on a stable and timely supply chain for raw materials and distribution. However, the current logistical challenges, particularly the rise in shipping costs and extended lead times due to the conflict in the Red Sea, are driving up production expenses. To maintain profitability amid increased transportation costs, manufacturers are passing these additional expenses onto consumers, resulting in higher global prices for Salicylic Acid.

The U.S. economy has regained momentum this spring, spurred by strong consumer spending after a slow start to 2024. Recent data shows a decline in inflation, which may prompt the Federal Reserve to reduce interest rates. This potential policy shift has increased consumer demand, driving up Salicylic Acid prices.

In Europe, particularly in Germany, consumer sentiment is on the rise, with household income expectations reaching their highest level in over two years. This optimism is fuelled by slightly lower inflation and noticeable wage increases, which have also contributed to higher Salicylic Acid prices. Overall, the improvements in both business and consumer confidence suggest a positive economic outlook for the region.

In India, business activity surged at its fastest rate in three months in July, driven by strong demand and favourable market conditions. Robust new business in the services sector and consistent manufacturing orders have played a significant role in elevating Salicylic Acid prices.

According to ChemAnalyst's analysis, Salicylic Acid prices are projected to keep rising due to sustained high demand and limited supply. Additionally, central banks in Western regions may consider cutting interest rates later in the year, which could boost overall demand and provide further support to the Salicylic Acid market.