Weak feedstock Acetic Acid performance cause Subpar Butyl Acetate prices in Germany

Hamburg (Germany): The decline in Butyl Acetate prices this week is primarily linked to the lack of support from Butyl Acetate upstream Methanol, as noted in Methanex's monthly report indicating sustained low methanol contract prices. This resulted in decreased prices of Butyl Acetate feedstock Acetic Acid. Despite weak demand, manufacturers maintained stable operations to meet downstream industry needs, leading to ample inventories. Additionally, traders resorted to offering inventories at discounted prices to stimulate market transactions.

The European Central Bank's decision to maintain the interest rate at a relatively high 4.5% reduced purchasing power for downstream consumers. However, there is anticipation of Butyl Acetate price increases in the Belgian market as interest rates decrease, potentially boosting purchasing power downstream. Forecasted rises in energy costs, along with upstream Methanol prices, are expected to increase production expenses. Furthermore, demand from international markets, particularly Germany and Belgium, remained subdued due to a weak economic outlook but is expected to pick up, consequently raising domestic Butyl Acetate costs in the Belgian market.

In line with market supply dynamics, Butyl Acetate plants have continued steady operations, leading to abundant inventories in the market. Moreover, reduced demand from downstream industries has further exacerbated the downward pressure on pricing. The consistent operations of Butyl Acetate manufacturers have ensured ample inventories to meet downstream demand. Despite challenges such as the Red Seas crisis affecting freight charges, demand from downstream industries in Belgium has effectively countered upward pressure on Butyl Acetate prices.

The Butyl Acetate downstream construction sector, alongside other industries, has faced challenges due to sustained high inflationary pressures. Peter R. Huntsman, Chairman, President, and CEO, has observed a slight improvement in early 2024 compared to the lows experienced in the fourth quarter of 2023. Despite uncertainties regarding the complete recovery of demand, Huntsman maintains a positive outlook for the future. The company plans to leverage volume advantages once demand increases and underscores the importance of cost management.

While the timing of the recovery is still uncertain, there is a belief that construction spending and industrial activity in crucial markets will eventually revert to their previous levels. This resurgence will prioritize energy efficiency and lightweight materials, both of which play a significant role in overall sales. Despite traders' attempts to reduce inventory prices to stimulate market activity, the short-term outlook remains subdued due to decreased activity in downstream industries. Nevertheless, there are expectations of growth at the beginning of the second quarter of 2024.Despite this, the PMI value declined as of February, contributing to prolonged low prices of Butyl Acetate due to sluggish manufacturing activity and reduced demand from downstream industries.