European Monochloroacetic Acid Prices Buckle Under Economic Challenges in 2023; 2024 Might be Another Tough Year

Rotterdam (The Netherlands): European Monochloroacetic Acid prices are ending 2023 on a weak note. Disregarding short periods of an uptrend, the Monochloroacetic Acid market mostly followed a bearish run throughout 2023. Demand was under constant pressure from persistent inflation woes and high-interest rates across the regional market. In addition, volatile energy prices coupled with low feedstock costs have further exerted downward pressure on Monochloroacetic Acid prices. Market participants speculate that Monochloroacetic Acid prices might decline further in anticipation of weak demand dynamics.

According to ChemAnalyst, prices of Monochloroacetic Acid have inched lower in the German market during the last quarter of 2023. The decline in prices was majorly attributed to the weak feedstock acetic acid and acetic anhydride prices, which resulted in the low production of Monochloroacetic Acid and supported the prices to follow a downward trend in the domestic market. On the input energy front, European natural gas prices extended losses to below €31 per megawatt-hour, after an 8.6% drop, driven by abundant gas supplies caused by the extended mild weather in the region, despite the ongoing cold snap. The mild conditions have led to a significant reduction in gas consumption for heating, while energy-intensive firms reduced production, leading to decreased overall demand. Consequently, regional gas storage levels have remained elevated, exceeding the usual levels for this season. Beginning the season nearly at full capacity, at 90%, present stockpiles have only slightly diminished to approximately 85%, enabling Europe to uphold a gas reserve level that surpasses initial expectations.

This further reduced the overall manufacturing cost of Monochloroacetic Acid within the domestic market.

In addition to this, the German Federal Statistical Office has indicated that the country's inflation rate experienced a surge, reaching 3.7% year-on-year in December, which is an increase from November's 3.2%. This escalation was primarily driven by a 4.1% increment in energy prices. The rise in energy costs was influenced by government subsidies, which exerted pressure on the purchasing power of consumer industries. Meanwhile, demand for Monochloroacetic Acid from the downstream agrochemical and surfactant industry has remained subdued ahead of the null season in the domestic market, leading to the bearish market sentiments of Monochloroacetic Acid among the manufacturers. In addition, the Ifo business climate index dropped from 87.2 in November to 86.4 in December, mirroring a weak market sentiment. Furthermore, manufacturers have cleared their inventories at low prices during the destocking season, which has contributed to subdued demand. As a result, prices of Monochloroacetic Acid FOB Hamburg were settled at USD 1046/MT with a month-on-month decrement of USD 11/MT during December 2023.

Looking ahead to 2024, ChemAnalyst expects that Monochloroacetic Acid prices might follow the downtrend across Europe. Demand from the downstream agrochemical, surfactant industry is not likely to improve as the European market struggles against a combination of high interest and reduced consumer spending which might continue to dampen Monochloroacetic Acid demand. Meanwhile, inquiries from the overseas market are expected to decline as macroeconomic challenges continue to keep consumer spending at bay. In addition, producers will face difficulty in rising export prices as buyers will find it difficult to stomach. However, persistent tensions in the Red Sea or a broader conflict in the Middle East would significantly impact oil markets, triggering a substantial geopolitical shock. In addition, feedstock acetic anhydride and acetic acid prices might increase, but it might minimally impact the prices of Monochloroacetic Acid. Furthermore, it is projected that operating rates might remain under pressure in the first quarter of 2024 amid a lack of major improvement in downstream demand. Despite this factor, the material available might be sufficient to feed the low regional demand. However, following increased attacks by the Iran-backed Houthis, the world's largest shipping companies like Maersk and Hapag Lloyd are avoiding the Red Sea and Suez Canal. This avoidance is anticipated to cause shipping delays, subsequently impacting container ports across Europe and leading to an increase in transportation costs.