Subdued Automotive Industry Depreciates Prices of POM Across the North American Market

The market situation of Polyoxymethylene (POM) witnessed a bearish market situation towards the beginning of November 2023 across the North American market. The prime reason for this trend was largely attributed to declining costs of feedstock Formaldehyde and upstream Crude Oil. The depreciation in the prices was also supplemented by lower exports to the importing Mexican and Canadian markets because of a softer turnaround in the automotive industry.

Prices of Polyoxymethylene (POM) have depreciated by approximately 5% across the United States which was further complemented by depreciating prices of feedstock Formaldehyde. Feedstock Formaldehyde prices declined by approximately 3% in the South Korean and Chinese markets, from where the Polyoxymethylene is largely imported into the United States. This consequently eased production costs and resulted in inexpensive imports of POM across the United States from China and South Korea. Demand for POM from the automotive industry was largely slow as automotive sales depreciated by almost 10% in October with further depreciations being expected in November. In terms of economic conditions, current factors largely indicated a slow economy as inflation rates declined to 3.7% in October with further depreciations being expected in November, according to the Federal Bank. Inflation rates have still not been curtailed in the target corridor of 2%, as the Federal Bank (FED) is expected to hike interest rates by another 25 basis points in January 2024.

Additionally, the underperformance of the automotive industry in Mexico also further reduced the demand for POM for exports. Automotive sales plummeted by approximately 4% in the Mexican market, despite the economy of Mexico showing a healthy performance. However, nearshoring activities gained strength in October, as many automotive manufacturers continue to shift their production lines to Mexico due to increased input costs in the United States.

Overall, prices of POM are expected to increase in the incoming festive season. This is likely to add pressure to the automotive sector which is expected to observe an increment in purchasing activities. Furthermore, nearshoring activities by key automotive manufacturers to Mexico are more likely to increase demand for POM from the downstream automotive manufacturing sector. The performance of the automotive industry is also expected to play a larger role in defining the price trend of POM. In contrast to the current demand, production costs across the South Korea and China are also expected to drive the market situation of POM across US and Mexico except domestic demand.