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Supply Disruptions And Rising Cost Support Result in Bullish H-Acid Prices
Supply Disruptions And Rising Cost Support Result in Bullish H-Acid Prices

Supply Disruptions And Rising Cost Support Result in Bullish H-Acid Prices

  • 13-Jun-2024 12:29 PM
  • Journalist: Francis Stokes

Qingdao (China): The global H-Acid market experienced a significant increase in prices attributed to supply chain disruptions and increased production costs of the commodity, driven by rising prices of the feedstock Naphthalene and Ammonia. Furthermore, the demand for H-Acid from the downstream construction sector increased as well. However, due to the absence of sufficient inventory levels, the H-Acid market experienced a bullish market sentiment.

In May 2024, the H-Acid market in China witnessed an incline of 5.74%, settling at USD 4600/MT (FOB-Qingdao), driven by rising production costs despite a sluggish downstream construction sector. This led to higher demand for H-Acid, compounded by insufficient inventory levels. In the feedstock market, Naphthalene prices increased slightly by 0.4%, while Ammonia saw a significant rise of 3.24%, contributing to the higher production costs. Furthermore, the supply chain experienced disruptions due to a five-day market closure and heavy rains in China. During the May Day holidays, market sentiment was dampened by a decline in business confidence, with trading activities subdued, resulting in supply shortages. Consequently, trading activities surged when the market reopened to meet the growing demand for H-Acid. However, the supply chain continued to experience delays from heavy rainfall, causing further price hikes. Additionally, exports in May grew by 7.6% year-on-year in U.S. dollar terms, surpassing expectations of 6% growth.

Similarly, the US H-Acid market experienced a bullish trend influenced by several disruptive factors. Port congestion in various Asian regions caused delays, complicating the logistics of transporting H-Acid from China to the US. Additionally, heavy rainfall in China further disrupted the supply chain, leading to more delays in the production and shipment of H-Acid to the US market. The start of the May holidays in China temporarily halted market activities, exacerbating the imbalance between supply and demand, and resulting in a decline in business confidence along with disruptions in production and shipping operations, creating a backlog of orders and shipments.

According to several sources, freight charges increased by 34% due to the Asian port congestions and the disruption due to the ongoing Red Sea Crisis and container shortages. The production cost of H-Acid also rose, contributing to the overall price hike. This was influenced by price increases in the feedstock market, where both Naphthalene and Ammonia witnessed substantial increase. The upward trend in these critical raw materials directly impacted the cost of producing H-Acid, pushing prices higher. Furthermore, high interest rates affected the H-Acid market. Economic indicators showed positive trends, with the US Manufacturing PMI increasing in May compared to April, marking the fourth improvement in the past five months and indicating a modest enhancement in the manufacturing sector's health.

In May 2024, the Belgian H-Acid market saw a sharp increase of 4.61%, driven by labor imbalances, increased demand from the downstream construction sector including paint and coatings, and supply chain disruptions. Imports of Chinese H-Acid surged due to rising demand, leading to higher import expenses. The Red Sea Crisis, linked to the ongoing Israel-Hamas war, disrupted global supply chains and increased import prices from China. This crisis, along with heavy rainfall in China and holidays at the start of the month, further disrupted the supply chain. Additionally, the production cost of H-Acid rose due to higher prices of feedstock Naphthalene and Ammonia. The European construction sector faced significant labor imbalances, with nearly half of the occupations in this sector being scarce. According to sources, freight charges from the Far East to Europe increased by 29.72% due to the Red Sea conflict and Asian port congestion.

According to ChemAnalyst, the H-Acid market is anticipated to increase further in the upcoming weeks as the supply chain might experience disruption due to port congestions in the exporting nations and the ongoing Red Sea crisis. This might result in a supply-deficient scenario for H-Acid, hence the prices might experience a further incline in their trend.

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