Diacetone Alcohol Prices Remain Weak Amidst Sluggish Demand in the US Market

The price of Diacetone Alcohol (DAA) remained weak in the US market due to the low orders received from the downstream coating and construction industries. In August,  several US companies indicated a slower expansion in their output, with activity hovering close to stagnation across the private sector. The DAA manufacturing experienced a contraction once again as production declined, while service providers witnessed their growth rate slowing down to the lowest level since February. The slowdown in economic activity was primarily driven by subdued demand for the products, including DAA, from clients, resulting in the first decline in total new orders in the past six months. The recent survey from the market participants' Manufacturing Purchasing Managers' Index (PMI) pointed to a significant deterioration in operating conditions in the middle of the third quarter. This decline marked the second-largest contraction since January, as a renewed decrease in output and a sharper decline in new orders exerted pressure on the sector's overall performance.

As per ChemAnalyst, the cost of DAA was hovering around USD 2018/MT on a FOB Texas basis during the week ending 18th August 2023.

Simultaneously, there was a resurgence of cost pressures as the pace of input price inflation accelerated, influenced by higher fuel, wage, and raw material expenses for the production of DAA. Despite these factors, endeavors to maintain competitiveness and stimulate sales moderated the speed of selling price inflation, resulting in a slowdown from the levels observed in July.

The weakened demand environment for DAA became evident through the initial decline in new orders at US companies over the past months. Manufacturers of DAA encountered heightened difficulties in stimulating demand as new orders experienced a more rapid decrease. In parallel, service providers faced their most substantial drop in new business since the beginning of the year.

The lackluster demand for DAA in crucial export markets, particularly in Europe, has contributed to a renewed decline in new export orders during August. This decline in foreign customer demand for DAA continues the pattern of contraction that has been observed since June 2022, with only a brief and marginal expansion experienced in June 2023.

The price of DAA is likely to decline in the US market due to the low demand from overseas markets and subdued demand conditions. The decline in new orders received by companies in August might lead to a potential contraction in output for September, as businesses may need to align their operational capacity with the worsening demand conditions. Similarly, the recent near stagnation of employment in August could potentially transition into job cuts in the upcoming months.