European DEG Prices See Slight Decline Amid Soft Demand and Economic Challenges
- 16-Dec-2024 3:45 PM
- Journalist: William Faulkner
The European market for Diethylene Glycol (DEG) remained stable in the first half of November 2024, with Germany witnessing only minor price fluctuations. During the first half of the month, DEG prices declined slightly by 0.5%. This decrease was primarily due to subdued demand from downstream industries, including resin manufacturing and the paints and coatings sectors, which faced weaker activity during this period.
The European paints and coatings market showed a sluggish recovery in November, with demand stabilizing but growth remaining modest. Automotive coatings, particularly for electric vehicles, stood out as a promising segment to support the demand amidst stagnant demand in construction and industrial coatings. Supporting this, data from Germany’s Federal Motor Vehicle Office (KBA) revealed 244,544 new passenger car registrations in November 2024, reflecting a 5.4% increase from the previous month. However, on a year-on-year basis, registrations saw a marginal decline of 0.5%, underlining the overall weakness in automotive sales, which directly impacts DEG demand.
The construction sector in Europe faced headwinds, with the Eurozone's economic momentum hitting months low. Contraction in manufacturing and services signaled broader economic challenges, while inflation in the Eurozone edged up to 2.3%. This increase is unlikely to disrupt the European Central Bank’s monetary easing trajectory. Meanwhile, political uncertainties in France and Germany further dampened investor confidence, adding complexity to the market environment for DEG.
Supply of DEG remained limited, as overseas import prices increased during the period. This rise in costs prompted domestic traders to exercise caution, avoiding additional imports amid weak demand and moderate inventories. On the production side, domestic costs stayed low due to favorable trends in feedstock prices. Ethylene Oxide, a key feedstock for DEG, saw a significant 2.36% decline, driven by reduced upstream Ethylene support in early December. This decline, coupled with falling crude oil prices, contributed to lower manufacturing costs.
The upstream crude oil market further supported the trend, with Brent crude prices dropping by 1.58% during the period. Further, according to Destatis, energy product prices in Europe declined by 3.7% year-on-year in November, while electricity costs fell by 4.1% compared to the same period in 2023. Brent crude prices eased to USD 74.35 in November from USD 75.63 in October, providing additional relief to DEG producers.
Logistics costs for DEG remained low as reduced freight rates helped ease transportation expenses. However, rail freight disruptions in Northern Germany, caused by the closure of a key corridor leading to Hamburg Port, created localized supply chain challenges. These disruptions added complexity to the otherwise stable market dynamics for DEG in the region.