UK Butyl Acetate Prices Remain subdued amidst weak feedstock Cost and Sluggish Demand

Southampton (UK): The Butyl Acetate market in the UK has remained stable due to consistent feedstock methanol prices, as reported by Methanex, which indicated stable June contract prices. Additionally, Butyl Acetate market stocks are sufficient to meet downstream demand. Europe’s Butyl Acetate downstream construction industry continues to face a labour imbalance, with nearly half of the occupations in shortage belonging to this sector. The sustained demand in the Butyl Acetate downstream construction sector, driven by increased foreign direct investment, has fostered positive market sentiment.

The European Central Bank (ECB) has cut interest rates by 25 basis points, lowering its deposit rate to 3.75%, joining other countries like Canada, Sweden, and Switzerland in reducing rates. The Eurozone Composite PMI for May 2024 was slightly revised up in comparison to April, marking the strongest increase in Eurozone economic activity since May 2023.

Additionally, Butyl Acetate import prices from China remained stable this week, contributing to overall subdued import costs. The recent escalation of violence in the Red Sea amid the ongoing Israel-Hamas conflict is expected to significantly reduce the shipping industry’s capacity.

The ongoing Red Sea crisis continues to disrupt global Butyl Acetate supply chains, particularly affecting Asian markets, with no resolution in sight. Despite this, domestic production remains strong, meeting high demand from Butyl Acetate downstream industries, notably construction. Butyl Acetate upstream methanol prices have stayed stable due to steady production costs, although a potential rise in Butyl Acetate prices is anticipated due to heightened risks from Houthi activity in the region. Ocean freight rates from Asia to Europe are surpassing contract rates as vessel capacity tightens because of the crisis. Efforts to counter longer transits via southern Africa face challenges, limiting additional space provision. Market sources indicate that the complexity of the situation in the Red Sea has intensified over the last few months. To safeguard crew, vessels, and cargo, there has been a shift to rerouting around the Cape of Good Hope for the foreseeable future. This has forced vessels to lengthen their journeys, resulting in additional time and costs to deliver cargo to its destination.

Demand for Butyl Acetate remains strong, driven by its use in Belgium's flourishing construction industry. The ECB's interest rate cut has created positive market sentiment as mortgage rates are likely to decrease, further boosting the market. Positive indicators include increasing GDP, industrial and construction production, and retail trade sales, along with stable inflation and a stable or falling unemployment rate. However, the rise in construction and renovation costs, as well as financing costs, has intensified challenges for affordable and sustainable housing in UK.