The US Diacetone Alcohol Market Recovers as Commercial Building Segment Strengthens

Prices of Diacetone Alcohol (DAA) have increased in the US market by approximately 3% during the second half of January 2024 across the US market despite prices of the feedstock Acetone continuing a depreciating trend.

The prime reason for the increments in the prices of DAA was attributed to high demand from the downstream construction sector which was recorded to have been performing well. The increased demand of DAA from the downstream paint and coating sector was largely attributed to an increase in the construction in the commercial building segment. The US hotel construction witnessed a surge of approximately 7% towards the termination of 2023 and is likely to witness increments in January 2024.

The high demand for exports of DAA to the Mexican market was also attributed to well performing construction sector across the Mexican market. With automotive industries continuing to shift manufacturing facilities across Mexico. The expectations of an increase in automotive production also prevail which is anticipated to pressurize the existing inventories of DAA. Middle tier extended stay brands were recorded to also have a large role in the pipeline, with extended stay projects making up a significant chunk of it. That includes activities from the leading hotel groups such as Marriott, Hilton, Best Western, Hyatt and IHG which continued to pressurize the existing inventories of DAA circulating in the DAA market.

Moreover, business activity in the US signaled a stronger upturn in activity at the start of the year, as output growth quickened to the sharpest rate in seven months. While manufacturers continued to experience a decline in production due to worsening supply challenges, service providers were recorded to have received heathy orders both from domestic and international clients. However, there was a general improvement in the state of the demand, as businesses reported higher growth in new orders for both goods and services, contributing to a 20-month high in company confidence for the coming year. From a pricing perspective, the beginning of the year saw a somewhat slower increase in total input costs while businesses increased their selling prices at the weakest rate since May 2020. As work backlogs increased for the first time in ten months, businesses added employees at a marginal rate. Annual inflation rates were recorded to not have changed with current rates standing at 2.6% as compared to December 2023.

Prices of DAA are expected to stabilize towards the beginning of February 2024 as prices feedstock Acetone stabilize which is expected to stagnate production costs. The demand of DAA from the downstream paint and coating industries is also expected to moderate as demand from the construction and the automotive sector is also expected to wane.