European Monochloroacetic Acid Prices Brace for New Hikes Driven By High Feedstock Prices

Hamburg (Germany): After experiencing a bearish trend in the previous month, Monochloroacetic Acid prices have gained an upward trend across the European market during early Q1 of 2024. The latest increase in prices was primarily attributed to rising energy and feedstock prices. In addition, lower operating rates of manufacturing firms in recent months have also exerted supply-side pressure. However, demand from the downstream derivative industry has not shown much enthusiasm in the regional market. On the other hand, market players expect prices of Monochloroacetic Acid to continue rising in the near term due to further projections of a rise in energy and feedstock costs. The availability of finished stock of Monochloroacetic Acid is anticipated to be insufficient within the regional market, while demand from the downstream industry will remain under pressure due to macroeconomic headwinds.

Prices of Monochloroacetic Acid have witnessed an increment of USD 31/MT in the German market. The feedstock acetic acid and acetic anhydride prices have increased, which in turn has led to the high production cost of Monochloroacetic Acid in the domestic market. These factors have led to bullish market sentiments for Monochloroacetic Acid among manufacturers.

Meanwhile, the rise in crude oil prices has been fuelled by Houthi militants' attacks on commercial vessels in the Red Sea. As a result, major shipping companies worldwide have halted shipments via the Red Sea, opting instead to redirect container cargo around the Cape of Good Hope at the southern tip of Africa. This decision has extended travel distances by thousands of miles, resulting in increased expenses, delayed deliveries, and disruptions in the supply of essential components and consumer goods to Europe. These disruptions pose a new threat to the European economy and could potentially disrupt central banks' plans to reduce interest rates. Overall, the rise in crude oil prices has further escalated the prices of Monochloroacetic Acid.

Additionally, the availability of finished stock of Monochloroacetic Acid was inadequate due to low operating rates in the domestic market, resulting in successive price realizations of Monochloroacetic Acid. However, demand from the downstream surfactant and agrochemical industry has remained inactive in the domestic market due to sluggish consumption from the end-user sector, but it was insufficient to drive the price realizations of Monochloroacetic Acid to the lower end in the domestic market. Meanwhile, demand from other European countries has also been observed on the lighter side. According to data from Federal Statistics, exports to EU countries dropped by 5.5% compared with the previous month, while exports to countries outside the EU declined by 3.5%. As a ripple effect, prices of Monochloroacetic Acid FOB Hamburg were settled at USD 1077/MT during January 2024.

Looking ahead, prices of European Monochloroacetic Acid might rise in the coming month as feedstock acetic acid and acetic anhydride prices are likely to increase. Moreover, if shipping disturbances and elevated oil prices persist, they have the potential to impede efforts to reduce inflation rates from their peak levels in decades following the COVID-19 pandemic and the energy price surge exacerbated by Russia's invasion of Ukraine in February 2022. On the demand front, inquiries from the downstream agrochemical and surfactant industry are not expected to improve in the forthcoming weeks. Meanwhile, operating rates are not anticipated to improve until Q1 of 2024 amid weak demand.