Polyalphaolefin (PAO) prices easing in Germany owing to sufficient supplies

The prices of Polyalphaolefin in the German market have been on a downward trend since the beginning of the year, Polyalphaolefin 4cSt FOB Dusseldorf is priced at USD 4177/MT and this declining in prices continues, despite the Energy crises and soaring upstream Ethylene prices in Europe. There was also various export shortage of upstream Crude oil to Germany from the Middle Eastern countries that didn’t affect the damping of Polyalphaolefin prices.

Polyalphaolefin is primarily used as lubricants (gear oil, bearing oil, brake oil) in the automotive industries and decreasing prices of Polyalphaolefin can be directly traced to the poor performance of the automotive industry in Europe, while Germany is Europe’s leading production and sales market. The country's world-class R&D infrastructure, complete industry value chain integration, and highly qualified workforce create an internationally superior automotive environment. The semiconductor chip shortage has prolonged than anticipated and has reduced the demand for Polyalphaolefin in the Automotive sector in Germany. The car companies’ plan to improve production with reduced chip usage prevailed to be of no use and dampened the demand of Polyalphaolefin even more.

The supply of upstream Ethylene from the Netherlands to Germany has been stable, unlike other trades and trade route which is affected by the ongoing Russia-Ukraine war. Since the demand for Polyalphaolefin from the local Netherlands market (Automotive sector) is also performing poor due to the chip shortage in Europe, they have also increased their exports and lowered their products’ prices resulting in a sufficient supply of Polyalphaolefin to Germany.

As per ChemAnalyst, the price drop will continue till the shortage issue of chips is resolved or the downstream Automotive industry finds an alternate for chips. Ultimately the price of Polyalphaolefin in Germany will start rising only when the production of automotives return to its former Glory in Europe (Germany).