For the Quarter Ending June 2023
During the second quarter of 2023, the prices of POM underwent notable stability due to multiple economic factors affecting the downstream sector within the region, leading to reduced demand. The pessimistic global economic conditions and other restrictive elements in the financial markets further compounded the situation, causing a drop in sales and profits for traders during this period. Moreover, the downstream industry, in the initial half of the quarter, was grappling with disruptions in the supply chain and inflationary pressures. Although major players in the POM market encountered supply-related issues, the demand for the product remained subdued, particularly due to the rising interest rates in the US market. The decision by the Federal Reserve to increase interest rates at the beginning of the quarter aimed at curbing inflation in the United States played a significant role in dampening demand in several downstream sectors, consequently influencing the prices of the product in the US market. Additionally, another contributing factor to the change in the POM price trend was the fall in the prices of upstream crude oil during this quarter, providing ease in the input cost pressure to the market players.
The Asia-Pacific (APAC) market saw a period of relative stability in POM prices Throughout the second quarter of 2023, characterized by minimal fluctuations. The offset by lackluster demand within the downstream automotive and housing segment in the region, causing concerns among market participants. China's economic conditions also played a role in dampening domestic market enthusiasm, primarily due to sluggish consumer sentiment. Moreover, slow offshore trading activities further pushed POM prices downward. The price stagnancy of POM during the mid-quarter was influenced by two main factors. Firstly, the volatility in overseas demand had an impact, contributing to the overall uncertainty. Secondly, the limited availability of inventories added to the price stability. As the latter half of the quarter unfolded, manufacturers responded to the bearish market conditions by reducing their production run rates. This decision, in turn, affected prices as it lowered inventory stockpiling for the commodity. Additionally, setbacks in the downstream processing industry following the Holiday season during the second quarter exacerbated the overall market situation. Traders have faced an oversupplied market since the Labor Day Holidays in May 2023, compounded by the drop in crude oil costs and feedstock prices. To sum up, the downward trend in POM prices for the APAC region during the quarter ending June 2023 was a result of weak demand, external economic factors, and oversupply in the market.
Throughout the second quarter of 2023, the European market witnessed a general lack of growth in POM prices due to reduced demand in the downstream automotive industry along with an abundance of inventories. The automotive industry faced a notable decline in offers, while increased inventories were a result of rising interest rates by the European Central Bank, which limited consumer spending during the second quarter. To address the challenging financial climate, market participants closely monitored the situation and implemented various strategies to navigate the downturn. These measures included scaling back production rates, optimizing expenses, and ensuring a stable supply chain. Additionally, the decrease in upstream crude oil prices also contributed to the overall decrease in POM prices during this period. Meanwhile, the global economic slowdown had lasting impacts, leading to constrained investments, heightened debt vulnerabilities, and funding shortages in the regional market. Consequently, the demand for POM in the downstream sector significantly decreased. As of the end of June 2023, POM prices experienced a monthly decline of approximately 2%.
For the Quarter Ending March 2023
The prices of Polyoxymethylene (POM) in the US market have been fluctuating due to feedstock formaldehyde prices and moderate to low demand from the domestic market. The supply remained stable with no disturbances in the supply chain. However, the demand for POM has been low due to slow economic activities in the country, leading to a bearish market situation. In March, the US market faced a threat of an economic slowdown, with some major production companies putting their plant on maintenance. This led to significantly low demand from the domestic market, leading to a downtrend in POM prices.
Polyoxymethylene (POM) prices kept on fluctuating in the Chinese and Korean markets in the first quarter of 2023. In February, POM prices showed a marginal improvement due to rising demand and restocking by traders, while in March, prices continued to trend upward due to robust demand from importing countries and high production costs in the domestic market. However, POM prices declined consistently for three weeks in late March, owing to product abundance in the country and slow offtakes from domestic and overseas downstream buyers. Overall, the demand for POM remained low, while supplies were stable throughout this timeframe, except for partial disturbances during the post-lunar holidays restocking activities in China.
The price of Polyoxymethylene (POM) in the European market kept fluctuating due to uncertain market fundamentals, with demand remaining moderate to low. Despite some disturbances in the supply chain due to snow, supplies remained stable to firm, and the overall demand-supply gap was narrow enough to support the price trend. The threat of recession was decreased, generating optimism for future demand. As of 31st March, POM prices in the German market remained unchanged due to stable market fundamentals and a balanced demand-supply scenario, with a marginal improvement seen in the domestic automotive and construction sector. The easing of energy prices has also induced optimism regarding a decline in production costs.
The cost of Polyoxymethylene witnessed an increased price trend for the first two months of Q4, but it declined in the final month of 2022. The inquiries from the international market were high, and the manufacturers raised the cost of the product. Additionally, the approaching holiday season further exacerbated the weak demand dynamics for POM and other petrochemical commodities. In addition, domestic POM prices have decreased further due to bearish demand from end users and ample material availability in Q4. The cost of Polyoxymethylene hovered around USD 4189/MT on a FOB Pittsburgh basis during December 2022.
In China, in the first two months of Q4, Polyoxymethylene prices saw an increased trend, but prices decreased in the last month of Q4 2022. Despite the low demand from the downstream automotive and construction sectors, the cost of Polyoxymethylene increased due to tight supply from producers. At the same time, health incidents affected material shipments in the Chinese domestic market. The market saw a wait-and-see attitude due to the supply of high-priced goods, and overall demand was just the basis of need. In December, Polyoxymethylene saw declined price trend due to a rise in COVID cases and reduced orders from end-use industries due to year-end, and they were waiting for new procurement.
Due to weak demand from the automotive and construction industries, Polyoxymethylene's cost decreased in the fourth quarter of 2022. The steady supply from East Asia at low prices further declined the cost of the product. Several European nations increased gas storage levels, and milder weather conditions contributed to the decrease in natural gas prices. Another factor that contributed to the decline in costs was the growing use of wind power to generate electricity in place of natural gas. The minimum orders from the importing countries due to low demand led to stockpiling in the market, further declining the price of Polyoxymethylene. On a FOB Hamburg basis, the cost of Polyoxymethylene reached USD 4240/MT in December 2022.