US HCl Prices Expected to Stay Stable Through August as Downstream Demand Falters

During the first half of August 2024, Hydrochloric Acid (HCl) prices remained stable, with only minor fluctuations within a narrow range. Analysts predict that this balance in HCl prices is likely to persist throughout the month. This trend is primarily driven by weak support from feedstock and declining demand from downstream industries.

The stability in HCl prices is further reinforced by the expected low manufacturing PMI, which has impacted HCl consumption during this period. Additionally, international demand for HCl shrank, leading to higher inventories that exerted downward pressure on overall prices. This situation indicates an ample supply of raw materials and HCl, as no significant disruptions have been reported.

Moreover, demand for HCl in its major downstream industries, particularly steel manufacturing, remained low during this time, coupled with reduced offtake from end-use sectors.  This diminished demand was exacerbated by a downturn in the construction industry. The housing market continues to struggle under the weight of high mortgage rates, with both existing and new home sales declining. Builder confidence in the market for newly built single-family homes fell to 39 points in August, down from a revised 41 points in July, according to the National Association of Home Builders (NAHB), marking the lowest reading since December 2023.

Despite the resilience of the U.S. economy in the face of higher interest rates and persistent inflation, purchasing activity for HCl remained low due to reduced consumer confidence. Many businesses view the current economic downturn as temporary, attributing it to deferred spending and investment in anticipation of the upcoming Presidential Election. However, there is some optimism in the market, as current inflation data suggests potential interest rate cuts by the Federal Reserve. If mortgage rates continue to decline, buyer interest and builder sentiment could improve in the coming months, potentially boosting HCl demand.

In contrast, HCl prices had declined in the previous month, dropping by approximately 6.3%. This decline was primarily due to reduced production costs and weak demand from downstream sectors. Notably, the price of Liquid Chlorine, a key feedstock, fell by 7.2%, further pressuring HCl prices downward. The subdued demand for HCl, particularly in the steel manufacturing sector, was compounded by a sluggish construction industry. Despite the price decline, the HCl market faced supply disruptions in mid July 2024 due to Hurricane Beryl, which led to force majeure declarations by Dow Chemicals in Texas and BASF SE in Louisiana. Additionally, Skyonic Corporation in Texas was also shut down.

The ChemAnalyst anticipates that HCl prices are likely to remain flat in the upcoming weeks, driven by lackluster downstream demand and limited cost support from feedstock.