German PU Resin prices Improves Despite low demand in March 2024

Prices of Polyurethane Resin (PU Resin) have witnessed a modest increment of approximately 3% across the German market despite demand conditions remaining highly unfavorable across the domestic German market.

Increments in the prices of PU Resin were mostly attributed to appreciations in the prices of feedstocks namely Methylene Diphenyl Diisocyanate (MDI), Toluene Diisocyanate (TDI), and Polyol which inclined by approximately 5%, 2.2% and 4% respectively, thereby increasing production costs of the product.  Increments in the prices of PU Resin were also complemented by the increments in the prices of upstream Crude Oil, which further appreciated by approximately 4% during the same timeframe.

The demand for PU Resin in Germany has been negatively impacted by the deterioration of the construction sector, which has experienced a contraction for the fifteenth consecutive month. The decline in activity in March 2024 was accelerated from February to March, with high-interest rates and economic uncertainty causing pessimism about the year-ahead forecast. However, after the first quarter, there were some signs of improvement in new orders. The housing sector remains the biggest impediment to overall industrial activity, with output levels falling quicker than in February. Civil engineering activity also showed weakness in March 2024, further weakening the German PU resin market. The decline in home prices, which fell 8.4% in 2023 and are expected to fall even more in 2024, is a significant factor in the slowdown in residential buildings. The importing British market, where the building industry resumed growth, was the only source of documented demand for PU Resin, with quarterly transactions rising from 1 million to 1.1 million. Both buyers and sellers are said to be participating in the market, with a 15.1% increase in agreed transactions and a 15.5% increase in buyer interest.

As for manufacturing activities, the German manufacturing sector ended the first quarter of the year with a further contraction. Business expectations for future production turned positive in March, although weak demand added to factory job losses and continued declines in pre-production inventories. At the same time, the purchasing activity of producers fell sharply again (for PU Resin as well). Although the rate of decline in purchasing power slowed compared to February, it was faster than the decline in production as companies sought to reduce purchasing inventories. The latest decline in preliminary inventories, the fourteenth in as many months, was the strongest since last October.

Overall prices of PU Resin are expected to appreciate in April 2024 due to anticipated increments in the prices of feedstock MDI, TDI, and Polyols which may edge up production costs. Furthermore, demand from the importing British market is also expected to provide some strength to the German PU Resin prices.