US Cellulose Ether Price Rises with High Production Costs Amidst High Demand from Mexico

Prices of Cellulose Ether (HEC) have increased by around 2% in the month of January 2024 across the US market. The prime reason for this increment is largely attributed to increasing prices of feedstock Propylene Oxide (which also appreciated by approximately 1%, increasing the production costs of Cellulose Ether) and healthy demand from the downstream industries.

In terms of demand, the demand from the downstream construction industry was recorded to healthy from the Mexican market. The high demand of Cellulose Ether was mostly attributed to increasing investments in construction projects which appreciated by 20% in the first ten months of 2023. The GFCF (Gross Fixed Capital Formation) of Mexico was reported to have increased by 20.4%, according to INEGI, Mexico in as investment sentiments in construction project, machinery and equipment continue to lay in the positive territory. Investments in residential construction also increased by 1.6% in Mexico, according to INEGI, Mexico further adding pressure to the inventories of Cellulose Ether across the US. Private and Public investments in construction sector appreciated by 20.3% and 20.1%, respectively. Recently, the federal government has committed significant funding to the development of important infrastructure projects, including as the Tulum Airport and the Maya Train railroad, while the private sector has invested significantly in the establishment and outfitting of manufacturing units.

Production costs of Cellulose Ether across the exporting US market were recorded to have increased as indicated increased prices of feedstock Propylene Oxide. The beginning of the new year saw bottlenecks across the supply chain system in across the US largely induced by challenging weather conditions which led to limitations in transportation and logistics. The manufacturing sector across the United States also saw and expansion in the manufacturing activities. Firms hired staff because of higher new orders and higher output estimates for the upcoming year. Supply disruptions (including Cellulose Ether) largely stemmed from the severe weather conditions which led to delays in trucking and transportation. Additionally inflationary paths also remained with the Federal Bank maintaining high interest rates of 5.25 to 5.5 with no changes expected until March 2024, as inflation rates were recorded above the target corridor.

Overall, prices of Cellulose Ether are anticipated to increase in February 2023 with the support of increasing prices of feedstock Propylene as the US market continues to suffer from the shortage of upstream Propylene due to closures of leading plants. Furthermore, demand of Cellulose Ether from the importing Mexican market is also expected to provide sufficient support to the US Cellulose Ether prices.