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Belgian Acetic Acid prices decline amid weak Feedstock Methanol and Bearish Market Situation
Belgian Acetic Acid prices decline amid weak Feedstock Methanol and Bearish Market Situation

Belgian Acetic Acid prices decline amid weak Feedstock Methanol and Bearish Market Situation

  • 10-Jun-2024 6:59 PM
  • Journalist: Robert Hume

The Acetic Acid market in Belgium has remained stable, largely due to consistent feedstock methanol prices reported by Methanex, which showed a stable trend in June contract prices. Further, market stocks have been adequate to meet downstream demand. Europe’s construction sector, a significant downstream consumer of Acetic Acid, continues to face a labour imbalance, with nearly half of the occupations in shortage belonging to this sector. The Acetic Acid downstream construction sector’s sustained demand, driven by increased foreign direct investment, has also fostered positive market sentiment.

The European Central Bank (ECB) has cut interest rates by 25 basis points, lowering its deposit rate to 3.75%. This move aligns with similar actions by countries such as Canada, Sweden, and Switzerland, and has created positive market sentiment as mortgage rates are expected to decrease, further boosting the market. Stronger demand for Acetic Acid has boosted output and hiring, with business confidence improving for the seventh time in eight months. Although inflation rates for input costs and output charges of Acetic Acid have cooled, they remain above pre-pandemic averages.

This week has seen a rise in import prices from China, leading to an overall increase in the import expenses associated with Acetic Acid. The latest threats of escalating violence in the Red Sea amid the ongoing Israel-Hamas conflict are likely to reduce the shipping industry’s capacity. The resulting bottlenecks, vessel bunching, delays, and equipment shortages are estimated to cause an industry-wide capacity loss on the Far East to North Europe and Mediterranean routes during Q2. Efforts to boost reliability include sailing faster and adding capacity, but war risk insurance premiums have surged.

The ongoing Red Sea crisis continues to disrupt global supply chains of Acetic Acid, particularly affecting Asian markets, with no resolution in sight. Despite this, European production remained strong for Acetic Acid, meeting high demand from downstream sector, notably construction. Acetic Acid feedstock Methanol prices have stayed stable due to steady production costs, although a potential rise in prices is anticipated due to heightened risks from Houthi activity in the region.

Demand for downstream derivatives ethyl acetate and butyl acetate, remains strong, driven by their use in Belgium's flourishing construction industry. The ECB's interest rate cut has created positive market sentiment of Acetic Acid as mortgage rates are likely to decrease, further boosting the market. The economic situation in both the euro area and the EU has shown positive signs, although tempered by less optimistic expectations. Positive indicators include increasing GDP, industrial and construction production, and retail trade sales, along with stable inflation and a stable or falling unemployment rate. However, rising construction and renovation costs, as well as financing costs, have intensified challenges for affordable and sustainable housing in Belgium. These increasing costs significantly impact access to housing at a time when sustainability requirements are becoming more stringent and the population’s housing needs are growing.

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