Aspirin Prices in Germany Decline Amidst Reduced Demand and Inflationary Pressures
- 18-Sep-2023 6:06 PM
- Journalist: Robert Hume
The Aspirin prices in Germany are currently contending with a substantial downturn in demand originating from its downstream sectors. Persistent inflationary pressures and global economic challenges have further exacerbated this situation. Consequently, Aspirin prices have experienced a notable decline, leading to heightened uncertainty within the industry. The confluence of reduced demand and inflationary effects presents formidable challenges for Aspirin manufacturers. Multiple factors, including imbalances in supply and demand, fluctuations in the costs of raw materials, global economic uncertainties, logistical impediments, and seasonal patterns, have all contributed to the downward trajectory in Aspirin prices observed in August.
The foremost producer and exporter of Aspirin, which also serves as the primary supplier of its essential component, Salicylic acid, has mirrored and is anticipated to continue mirroring the growth trend of the Chinese market. Industry participants are adopting strategic inventory reduction measures to manage risks and align with market dynamics, resulting in decreased procurement of goods. Additionally, the cost of vital raw materials for Aspirin production, particularly Salicylic acid, has fluctuated. The value of feedstock Phenol futures has also declined owing to expectations of increased supply and reduced demand.
Within the Phenol market, off-takes from downstream industries such as Chemical fibers and Solvents have been slower than expected, impacting Phenol market growth. However, this impact has been partially offset by a 4% price increase (amounting to €144 million). The underlying EBITDA for Q2 2023 stood at €790 million, experiencing only an organic decrease of -2.6% year-on-year, which reflects the quality of earnings. The year-on-year declines can be attributed to reduced volumes, partially offset by consistent net pricing and positive effects from the portfolio mix.
Another contributing factor to the decline in the Aspirin market is the supply and demand dynamics imbalance. Recent months have witnessed a significant increase in Aspirin production capacity, resulting in an oversupply of the compound without a commensurate increase in demand, leading to price reductions. Furthermore, logistical and transportation challenges have disrupted Aspirin pricing dynamics, with supply chain disruptions potentially elevating inventory costs for manufacturers and further exerting downward pressure on prices.
Conversely, Germany had benefited from a period of low-cost borrowing, contributing to a decade of growth in the real estate market, a downstream industry of Phenol. However, the real estate industry is now confronting a significant reversal of circumstances. The freight forwarding market continues to be affected by the normalization of consumer behavior and a slowdown in the global economy, resulting in reduced freight rates and lower forwarder yields due to the persistent Phenol supply-demand imbalance.
According to pricing intelligence from ChemAnalyst, Aspirin prices may increase in the coming weeks due to a potential global price surge. This is supported by the favorable situation in the Phenol market, and downstream unsaturated resin companies may also experience price increases. However, downstream resin companies are expected to restock as needed, which could impact Aspirin prices.