Weak Economic Outlook Puts European Adipic Acid Prices into turmoil, prices fall in July 2023

Hamburg, Germany: The price of Adipic Acid witnessed a stable to weak pattern in the European market due to the declining demand and downstream output, which resulted in a significant fall in work orders at the start of the third quarter of 2023.

ChemAnalyst’s data shows, the cost of Adipic Acid hovered around USD 2780/MT with a weekly decline of 0.3% on a FOB Hamburg basis in the last week of July 2023.

In July, business output in the Eurozone decreased at the sharpest rate in eight months, signaling a sluggish start to the third quarter, affecting the Adipic Acid derivatives market too. Indicators of future output and new order inflows that are deteriorating also suggest that there is a chance that the slump will get worse in the coming months and that enterprises may cut back on hiring. In the meanwhile, demand circumstances generally deteriorated. The rate of decline in new business inflows accelerated in July and reached its lowest level since last November. Business confidence was damaged by the worsening order book situation, which caused enterprises to have their lowest estimates for output levels this year since last November. Companies reduced employment in July as confidence declined and the demand situation deteriorated.

In the meantime, inflationary pressures abated in July as a result of slower service sector inflation and growing manufacturing deflation. Adipic Acid derivatives manufacturers experienced an increase in discounts of Adipic Acid as a result of supply chain improvements and falling demand. In the coming months, it is anticipated that the eurozone’s economy will continue to deteriorate as the services sector continues to deteriorate.

On the other hand, in July, expectations for UK business activity deteriorated for the third month in a row also affecting the demand fundamentals of Adipic Acid and its downstream derivatives. The level of optimism over the year's potential for growth is currently at its lowest point since December 2022. These were mostly due to a decline in company optimism that hit its lowest point this year across the service economy. Some businesses made comments about the weak demand in foreign markets, particularly from European customers. Increases in interest rates have an impact on both current and future expenditure plans, not just new orders.

It is expected that the cost of Adipic Acid is likely to decline in the European market in the coming months due to the poor performance of the downstream textile industry. Further, the European Central Bank (ECB) has announced to hike the interest rates this week which will impact the petrochemical industry, including the Adipic Acid market. This rise in interest rates could slow down economic growth and reduce the demand for Adipic Acid in the textile business.