High Feedstock Cost and Rising Consumption Drives the Polylactic Acid Prices in Germany

During the first week of May 2023, the Polylactic Acid industry experienced significant growth in Germany due to the increasing demand for flexible packaging. This growth was driven by the rising prices of Corn Starch, a key raw material used in Polylactic Acid production. Although government regulations were favorable in the European market, the shortage of raw materials fueled the market price, leading to increased production costs and higher prices for traders and suppliers.

In terms of economic trends, the Purchasing Manager Index in Germany remained at 44.5, while the Consumer Purchasing Index fell by 7.2%. Moreover, freight charges from North America East Coast to North Europe increased by 16% in the regional market. The market value of Polylactic Acid in Germany has risen to USD 4000/ton CFR Hamburg, mainly driven by demand from end-use industries such as transport, agriculture, textile, and packaging. Polylactic Acid has been growing rapidly in global demand compared to conventional polymers.

Despite its growing popularity as a sustainable alternative to traditional plastics, the increasing demand for Polylactic Acid has impacted supply and prices in the German market. The surge in demand from the downstream packaging and textiles market has impacted inventory levels of Polylactic Acid with traders and suppliers due to higher consumption, and the stock of raw materials, corn starch, also seemed to be depleting.

As per sources, the European Union is planning to replace short-haul Russian diesel shipments with long-haul shipments from the Middle East and Asia, which is expected to boost demand for LR tankers while diminishing demand for smaller MR tankers.

On the economic front, disappointing German March macro data increased the risk of a technical recession, and the final data of industrial production figures of Polylactic Acid released increased the risk that the German economy would end up in a winter recession.