The Global PAO Market Continue to Remain Steady Towards the End of the Second Quarter of 2023

At the end of June 2023, Polyalphaolefin (PAO) prices stabilized at low values across the globe owing to the abundance of stock availability in the face of weakening economic conditions and low buying enthusiasm in the downstream lubricant industry. The soaring interest rates to limit the inflationary pressure on the producers weighed on the product offtakes in the downstream sectors this month. Moreover, the market players opted to reduce their production rates and avoid piling up stocks.

The PAO prices have been falling steadily in recent weeks in the European market, backed by the sluggish demand from the downstream lubricant industry amidst rising interest rates and muted consumer spending in the region's automotive industry. The upstream Ethylene prices have fallen for several weeks of June, and producers have cut production accordingly to reduce piling up inventories. However, despite the production cuts, there are surplus Ethylene inventories in the European market. Hence, the market momentum of PAO has become very limited, given the weak demand and surged level of stocks. As per the latest data, PAO prices settled at the same values for the two consecutive weeks of June, i.e., USD 3006/MT Dusseldorf (Germany).

The PAO exhibited a stable price trend in June 2023 in the USA, backed by marginal market transactions across the regional market and stable downstream demand from the lubricant industry during this time frame. On the upstream side of PAO, the prices of Ethylene remained low this month, with a consistent fall in demand. The US inflation remained high in June, and the US Central Bank is pushing further with economic tightness to limit the price pressure on the domestic market of the USA.

Similarly, PAO prices were affected by the dropping export demand from the European countries and weak downstream demand from the lubricant industry in the APAC market during this time frame. The inadequate revival of the economic condition in China deprived the consumer buying sentiments in the local market, along with sluggish offshore trading activities that affected the pricing movement of the commodity. The bearish end-user demand in Europe also affected the Asian market of PAO in June.

As per the ChemAnalyst, the PAO price trend might get influenced by the slight improvement in the downstream lubricant industry demand and surplus availability of stocks across the globe. In the US and Europe, the upstream side is expected to overlap the downstream side of PAO in the coming weeks, and product prices will follow a downward trend at the termination quarter ending June 2023.