LABSA Prices Demonstrate Bearish Trend in the US Market as Winter Season Approaches

Prices of Linear Alkylbenzene Sulphonic Acid (LABSA) depreciated in the US market in the month of October by almost 3% due to depreciating prices of feedstock Linear Alkyl Benzene (LAB), which also witnessed a decline of 1% despite prices of another feedstock Sulphuric Acid witnessing stability. In terms of upstream, Crude Oil and Benzene prices also witnessed an overall decline of 3% and 1%, respectively, which eased production costs.

The demand for LABSA from the downstream soap and detergent sector of the FMCG industry continued to weaken as the winter months of 2023 neared when LABSA found its primary downstream application. Moreover, abnormal precipitation conditions across the United States continued to cause major parts of the Northern and Eastern parts of the United States to experience abnormally low-temperature readings, which proved detrimental to the market situation of LABSA. Furthermore, purchasing sentiments transitioned towards purchasing essential products such as comestibles and medicines, which was the prime reason for the increment of overall retail sales, which were found to have increased by almost 0.7% in September, with further increments expected in October 2023. This was largely due to the local populace continuing to stock essential products, the behavior of which is mainly driven by increasing interest rates with the possibility of further increments in December 2023. Current inflation rates across the United States stand at 3.7%, recorded in September, with minor depreciation expected in October, according to US Labour Department Data.

Furthermore, exports of LABSA to the Canadian market and Central American markets also witnessed a depreciation. The prime factor in the decline of exports to the Canadian market is attributed to the onset of the winter season, during which purchasing activities in the sanitation sector usually subdue. Exports of LABSA to Central and South American markets have also declined due to increasing inputs costs across the United States as factory gate charges are likely to increase as the Federal Bank is again expected to hike interest rates due to inflation rates still not being in the target corridor of 2% to 3%. This potentially casts a negative outlook amongst the suppliers based in Mexico, further impacting the prices of LABSA.

Prices of LABSA are expected to increase throughout the last quarter of 2023 as prices of upstream Crude Oil are expected to increase due to an upcoming strong demand for LNG, which is likely to increase production and energy costs despite low demand. Moreover, internationally, exports for LABSA are expected to decline as the winter season grasps the North and Central American markets.