Low demand, German PU resin suffered setbacks

As of July 2024, the German PU resin market continues to face a bearish trend, with prices falling by about 1.5% due to lower TDI prices and easing demand conditions. On a monthly basis, polyurethane resin prices fell by about 1.6%, reflecting generally negative market sentiment due to the ongoing downturn in the construction sector. Germany's manufacturing sector suffered a fresh setback at the end of the second quarter, with the pace of contraction in output and new orders accelerating after a sharp slowdown in May. In addition, the destocking cycle showed no signs of reversing, as companies reported worsening pre-production and post-production inventory drawdowns, underscoring the oversupplied nature of the market.

The main factor affecting the PU resin market in Germany is the 1.5% depreciation in the price of TDI feedstock, which has eased production costs. The ongoing weakness in demand continues to exert downward pressure on input costs and factory gate fees, as evidenced by the decline in PU resin prices. In the first half of this year, with the easing of the destocking cycle and the increase in the supply of materials, the delivery time of suppliers was significantly shortened, and significantly accelerated in June 2024. Following a slight decline in May, output fell more sharply in June due to a deterioration in the performance of major industrial sectors (consumer goods, intermediate goods and investment goods). This downturn coincided with a sharply accelerated decline in total new orders, reflecting pessimistic purchasing sentiment for PU resins amid a challenging export environment, particularly due to safety concerns in the Red Sea.

Demand for polyurethane resins in the construction industry remains weak. Purchasing activity by builders fell again in June, indicating low demand for polyurethane resins and reduced use of building materials, which led to higher supplier capacity and shorter delivery times. Fierce competition among suppliers continued to depress input costs, leading to a third consecutive monthly decline in purchase prices. The construction downturn in the property market is evident, with prices down 5.7 per cent year on year. Major cities such as Berlin, Hamburg and Munich saw the biggest declines, with single - and two-family homes down 9.5 percent, while apartments fell an average of 4.6 percent over the year. In less populated areas, prices of detached and semi-detached homes fell by 6.7 per cent and apartment prices by 2.4 per cent, reflecting lower consumption of PU resin as foreign investors hesitated to invest in the construction industry. The German statistics office reported that residential property prices fell 5.7 percent in the first quarter of 2024 compared to the same period last year, the sixth consecutive quarter of price declines. Residential properties were 1.1% cheaper in early 2024 compared to the fourth quarter of 2023, highlighting the ongoing challenges in the real estate market and resulting in low PU resin consumption.