Neopentyl Glycol (NPG) prices fell in India and were flat in Germany for the week ended July 11, as subdued demand, stable feedstock prices, and oversupply weighed on it. Disruptions caused by monsoons and poor construction activity in India, and port congestion and economic instability in Europe, continued to keep price support and purchases in check.
NPG prices in India declined during the week ending July 11, extending the downward trend observed in the previous review period. This fall comes after a period of price inertia and is chiefly prompted by poor demand fundamentals and surfeit market supply, even with steady feedstock prices. The major feedstock for producing NPG, formaldehyde, was price stable during the period. Its consistent availability underpinned smooth manufacturing operations, allowing producers to keep the production cost to low. This supported consistent levels of output, adding strength to the downward pressure on NPG prices in the absence of a corresponding increase in demand.
The strengthened June and early-July monsoon has softened Indian demand for NPG, especially from the construction industry, a major end-user through coatings and resins. Although total rainfall has been in excess, sub-normal rainfall in some parts of the northeast, east, south, and northwest hindered infrastructure projects, damping procurement. Housing demand remains weak despite the increase in property prices in metros due to concerns over affordability. A 100-basis-point RBI rate cut during Q2 has so far failed to trigger a sustained housing sales recovery, as buyers continued to exercise caution.
Likewise, NPG prices in Germany continued to remain under pressure in the week ended July 11, following on from the soft pricing witnessed in the past few weeks. Although prices did not register a significant fall, they were flat in the face of muted demand and an oversupplied market scenario, with logistical bottlenecks further tightening market conditions.
Germany's NPG supply was flat during July, buttressed by consistent raw material supplies and energy inputs. Nevertheless, North European ports Hamburg, Rotterdam, and Antwerp experienced bottlenecks and thereby delayed shipments, along with inland logistics delays, resulting in inventory accumulation and oversupply in the market. Demand-wise, activity to purchase NPG in domestic as well as European markets remained subdued. The industrial coatings and construction sectors improved only slightly, with Germany's construction sector still declining, though slowly. High interest rates and lingering economic uncertainty continued to constrain forward purchases. In the face of slightly improved consumer confidence and moderating inflation, procurement remained prudent. Housing activity within the Eurozone was soft, which weighed on demand for NPG used in insulation and coatings. While early indicators of recovery in sight, NPG demand remains weak and patchy and is providing minimal short-term price support.
As per the analysis made by ChemAnalyst looking ahead, market participants remain watchful. While demand is expected to recover moderately post-monsoon, near-term sentiment is expected to stay muted unless broader construction activity and economic indicators show signs of sustained improvement. Until then, the NPG market may continue to experience soft pricing and cautious trading behaviour.
