US Acetic Acid Market Sustains Stability, Expected Interest Rate Cut Induces Optimism

Acetic Acid prices in the U.S. market have maintained stability entering November 2024, continuing the trend from previous weeks. This stability is largely attributed to well-balanced inventory levels and moderate demand from sectors such as PTA, VAM, and other Acetate. Despite some challenges in the Acetic Acid downstream construction sector, including a decline in the October construction activities due to reduced commercial and institutional planning, the outlook remains cautiously optimistic. Developer confidence is high, fuelled by expectations of a market rebound in 2025, driven by anticipated interest rate cuts by the Federal Reserve.

The Federal Reserve recently implemented a 0.25% interest rate cut, reducing the benchmark to a range of 4.50%-4.75%, following a 0.50% reduction in September. In its statement, the Fed highlighted a balanced approach to managing inflation and employment, acknowledging a slight slowdown in economic growth and labor market strength. U.S. GDP growth reached 2.8% in Q3, slightly below expectations but still strong compared to historical trends. With another rate cut expected in December, the Federal Reserve is aiming for a "neutral" rate that balances the need for economic growth while controlling inflation.

Logistical challenges in the U.S. also played a role in stabilizing Acetic Acid prices. Significant disruptions at East and Gulf Coast ports, including New York, Savannah, and Houston, were caused by a labor strike in October. While a tentative agreement between the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX) allowed operations to resume, delays and congestion continue to affect shipping schedules (also affecting Acetic Acid). Extended lead times and potential rerouting are expected to persist into 2024.

In Europe, Acetic Acid prices in the Netherlands and the UK remained stable as well, despite increased downstream demand. Normalized inventories and a slight uptick in the European PTA market, driven by new orders from the UK, Germany, and Italy, supported this stability. However, industrial costs remain high due to previous Acetic Acid price increases. Additionally, disruptions at Rotterdam port, caused by a digital issue, led to supply chain delays, with some lead times extending by 24-48 hours. This prompted some shipping lines to consider alternative routes to mitigate delays.

According to ChemAnalyst, Acetic Acid prices are likely to increase due to rising feedstock methanol prices and growing demand from the downstream paints and coatings sector. The construction industry’s increased reliance on acetate, a key derivative of Acetic Acid, is expected to contribute to this upward trend. Furthermore, the Federal Reserve’s interest rate cuts are projected to stimulate demand from the acetate industry, which is widely used in construction, further driving Acetic Acid prices upward.