Acetic Acid Prices Trend Show Steadiness Amidst Inventory Surplus in US Market

Texas (USA): This week, the US Acetic Acid market remained stable, supported by sufficient inventories meeting downstream demand. Consumption in the terminal Acetic Acid market was average, with weak enthusiasm from downstream purchasers. Limited enterprise shipments resulted in increased Acetic Acid inventory levels, prompting factories to lower quotations to stimulate participation. Despite these efforts, low downstream consumption and weak demand kept Acetic Acid prices subdued.

The US Manufacturing PMI for May 2024 was revised higher from April, indicating modest sector improvement, marking the fourth increase in five months. New orders for Acetic Acid grew, driving faster production expansion, although the increase in total new business was softer compared to export orders. Firms noted improved demand from Europe, Asia, Canada, and Mexico, boosting business confidence, hiring, purchasing activity, and finished goods stocks. However, inflation in Acetic Acid input costs surged to its highest level in over a year, prompting firms to raise selling prices.

Some Acetic Acid manufacturers plan short-term shutdowns in June, but significant price increases are not anticipated due to low methanol feedstock prices and tepid demand downstream. Domestic Acetic Acid plants are operating at optimum capacity to meet current demand. The upstream methanol market has seen fluctuations, with expectations of price improvements. Early in the week, the domestic methanol market was robust due to external downstream procurement, while Acetic Acid procurement remained average, leading to weakened market sentiment.

US natural gas futures surpassed USD 3/MMBtu for the first time since mid-November, driven by hotter weather forecasts and increased electricity demand. This surge follows earlier production cuts, with the natural gas surplus from the warmer winter significantly reduced, alleviating storage concerns.

Demand from the downstream acetate industry, primarily used in construction, remained strong. Total construction starts increased in May, with higher non-residential building starts and non-building starts, while residential starts declined by 1%. Year-to-date through April, total construction starts rose by 13% compared to the first four months of 2023, with residential starts up 22%, non-building starts up 14%, and non-residential building starts up 5%.

Recent data suggests investor expectations for the Fed to lower interest rates in approximately three months. Following latest data, interest rate futures indicated a 60% probability of a rate cut in September from the current 5.25%-5.50% range. However, rising freight costs at the onset of the peak shipping season could increase production costs, complicating the Fed's objective of returning inflation to 2% and potentially delaying the first-rate cuts. Thus, expectations regarding Acetic Acid price increases remain uncertain.