After Lackluster End-use Demand in 2023, European NBR Prices Set to Extend Slump in Q1 2024

Hamburg, Germany: Throughout the year 2023, weak offtakes from downstream automotive industries have dominated market sentiments, taking a toll on the market fundamentals of Nitrile Butadiene Rubber (NBR). In 2023, EU countries faced significant challenges, including high inflation, rising interest rates, an economic slowdown, and elevated gas and electricity prices due to the energy crisis resulting from the Russia-Ukraine war. Inflation rates in both the EU and the eurozone have consistently exceeded the European Central Bank's (ECB) medium-term target of 2%, reaching 10% in the EU and 8.6% in the eurozone in January. While the inflation rate in the eurozone has gradually decreased over the year, the measures taken have led to economic stagnation and a significant decline in demand for raw materials, including NBR in Europe.

The ChemAnalyst database has shown that the prices of NBR have demonstrated a significant decrement on the back of low procurement from downstream automotive industries and were settled at USD 2320 per ton in the week ending 29th December. According to market participants, downstream automotive demand has entered the off-season in peak winter, leading to bearish NBR market sentiments. Some NBR companies have initiated scheduled maintenance during a slack season to alleviate the pressure stemming from a rapid uptick in inventory, thereby reducing the operating rates of NBR manufacturing firms. On the upstream front, the cost support from Butadiene has been limited as its prices have remained on the lower end during the given timeframe. The drop in procurement from European markets due to the economic slowdown has slowed down the market growth of NBR, leading manufacturers to keep their prices at the lower end. Additionally, domestic demand from downstream glove industries has been sluggish as these market players have already replenished their NBR stocks.

On the other hand, considering input energy, the European natural gas market is likely to face new challenges in 2024 and 2025 due to increasing geopolitical risks and the potential termination of the Ukraine-Russia transit deal. However, there has been progress in countering the energy crisis in 2023 as European firms are securing gas volumes for over 10 years, suggesting that natural gas might have a longer lifespan in Europe than previously thought.

According to the pricing intelligence of ChemAnalyst, the prices of NBR might remain on the lower end in the European market at the start of 2024 amid no expected rebound inquiries from the terminal markets. The operating rate of manufacturing firms is expected to remain under pressure amid lackluster demand from downstream automotive industries.