For the Quarter Ending September 2023
In the third quarter of 2023, Polyalphaolefin (PAO) prices in the North American market demonstrated relative stability, experiencing only minor fluctuations within a narrow price range. Although there was a slight decline in prices during the first and last months of the quarter, the second month saw an increase. This decrease is attributed to factors such as reduced demand from the lubricant sector, a global economic slowdown, and various macroeconomic influences. Additionally, the downstream industry faced its own unique challenges during this period. Notably, in September, the demand for PAO from the automotive sector in the USA market was significantly affected by a strike organized by the United Auto Workers (UAW) union, impacting production for three major market players. Reports from various market participants suggest that the ongoing UAW strike is expected to further diminish the demand for PAO within the USA market. However, in August, PAO prices experienced a marginal increase of 0.9%, driven by the rise in upstream Ethylene values and a market tightness due to increased crude oil futures globally.
In the Asian Amorphous PAO market, the third quarter commenced with an initial decline in the first month, followed by a notable increase throughout the quarter. July witnessed a drop in prices due to reduced demand from the lubricant industry and a decrease in the cost of upstream Ethylene in the regional market. However, international supplies were readily available at lower import prices, partly due to the favorable performance of the Chinese Yuan against the US dollar. The resumption of production in China increased product availability, leading market players to make sales with narrow profit margins and gradually regain market momentum, despite high inventory levels. In contrast, prices experienced a substantial increase in August 2023, and this upward trend continued through September. This surge was primarily driven by a tight supply situation within the country, rising upstream crude oil prices, and strong demand from the international market, particularly from India, owing to the robust performance of the downstream automotive sector. In September, labor shortages were observed, with many production units operating at reduced capacity due to mid-autumn holidays in the country. These factors combined to widen the gap between demand and supply, further supporting the price increase. Moreover, data from the National Bureau of Labor and Statistics indicated that the new order index remained relatively stable, with a marginal increase from 50.2 in August 2023 to 50.5 in September 2023, suggesting a consistent level of consumption of goods.
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The European PAO market exhibited an overall positive price trend during the first two months of the third quarter. However, in September 2023, prices experienced a significant decline of 25.7%. The earlier price increase was attributed to a combination of factors. Several market players reported product shortages due to reduced production rates in the German market. Additionally, price hikes were the result of product unavailability and an increased demand for exports to China, alongside a recovery in the automotive sector in the regional market. According to suppliers, the recent price increases in PAO were driven by supply bottlenecks, decreased production rates, and insufficient inventories to meet the growing global and regional market demand. However, during September, the shortage of PAO appeared to be easing, and prices surged to new heights. Nevertheless, according to market sources, prices started to return to their normal values after reaching these elevated levels in early September 2023. The market situation remained stable in terms of demand, with a modest resurgence in demand for PAO observed from the downstream lubricant and automotive industries during the current week. International market demand, however, remained subdued.
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