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Balanced Supply Keeps Adipic Acid Prices Unchanged in Europe Despite Weak Demand
Balanced Supply Keeps Adipic Acid Prices Unchanged in Europe Despite Weak Demand

Balanced Supply Keeps Adipic Acid Prices Unchanged in Europe Despite Weak Demand

  • 18-Jun-2024 4:42 PM
  • Journalist: Motoki Sasaki

At the start of June 2024, the Adipic Acid market in Europe displayed a notable steadiness in prices despite a backdrop of weak demand and rising freight rates. The adequate supply of Adipic Acid ensured that market prices remained unchanged, providing some relief to manufacturers and buyers amidst a challenging economic environment.

One of the key factors influencing the Adipic Acid market has been the low prices of Benzene, a primary feedstock for Adipic Acid production. The depressed demand for Benzene has kept its prices at lower levels, which in turn has had a stabilizing effect on Adipic Acid prices. Despite the stability in raw material costs, the overall market conditions remain unfavorable due to subdued demand across various sectors.

The downstream automotive sector, a significant consumer of Adipic Acid, has faced considerable challenges. According to the Federal Motor Transport Authority (KBA), Germany registered a total of 236,425 cars in May, marking a 4.3% decrease compared to May 2023. This decline in the automotive market has had a direct impact on the consumption of Adipic Acid, which is used in the production of various automotive components, including nylon fibers for tire reinforcements and other engineering plastics.

Sales of 100% electric models, in particular, dropped by 30.6% year-over-year, marking the fourth consecutive decline for this segment. This sharp decline is attributed to the German government's decision last December to abruptly halt its electric vehicle (EV) purchase subsidy program due to budgetary constraints. As a result, electric cars accounted for only 12.6% of the car market in May, a significant drop from the average of over 18% in 2023. This reduction in EV sales has further compounded the weak demand for Adipic Acid in the automotive sector.

While the prices of Adipic Acid remained stable, rising freight rates have posed new concerns for the market. Increased transportation costs have added pressure on manufacturers and distributors, potentially affecting the overall supply chain efficiency. The hike in freight rates is primarily due to ongoing geopolitical tensions and logistical challenges, which have disrupted global shipping routes and increased transportation costs.

Furthermore, the downstream derivative product, Polyamide 66 (PA66), is also encountering significant challenges. The weak demand across the automotive and construction sectors has exerted downward pressure on PA66 prices in Europe.

It is anticipated that the cost of Adipic Acid will likely decline due to oversupply and weak demand across the European market. The abundant availability of Adipic Acid has led to an oversaturated market, which, coupled with subdued demand from key sectors such as automotive and construction, is expected to drive prices down further.

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