Amidst High Upstream and Improvement in Terminal demand, European Fatty Acid Prices Escalate

Hamburg (Germany): In the domestic market of Germany, the prices of Fatty Acids have been inching higher. The increase in upstream palm oil prices, coupled with improved demand from the downstream personal care industries, has been contributing to the rise in Fatty Acid price realizations. Furthermore, a decrease in operating rates among Fatty Acid manufacturing firms has intensified the pressure on the supply side. In response to the bullish trends in upstream prices and the limited availability of finished goods, Fatty Acid manufacturers have opted to maintain high prices to enhance profitability.

Market sources indicate that this uptick is attributed to relatively low palm oil inventories in major producers Indonesia and Malaysia, as well as market apprehensions regarding global vegetable oil output. Additionally, with inflationary pressures stabilizing, driven by falling energy prices, there has been an observed improvement in Fatty Acid market transactions. According to market sources, Indonesia, the world’s biggest palm oil exporter, maintained its palm oil export tax and levy unchanged for May at USD 52 per ton and USD 90 per ton, respectively, which could further increase the manufacturing cost of Fatty Acids in the second quarter of 2024.

On the other hand, in May, demand from the Chinese market during the May Day Holidays remained moderate and did not lead to a positive development in Fatty Acid price realizations. According to the Malaysian Palm Oil Board (MPOB), Malaysia's palm oil supplies expanded at the end of April for the first time in six months, as production surged despite a decline in exports. In March, Malaysia's industrial production rose by 2.4% year-over-year, according to market sources. Exports of Malaysian palm oil products from May 1-10 fell by 14.2%, amounting to 369,920 metric tons compared to 431,190 metric tons shipped during April 1-10. Malaysia has maintained its June export tax for crude palm oil at 8% and has lowered its reference price to 3,956.06 ringgit (USD 845.13) per metric ton for June, down from May's reference price of 4,273.93 ringgit.

According to the pricing intelligence of ChemAnalyst, the prices of Fatty Acids are anticipated to increase further in the regional market. The increase in terminal demand is likely to keep the Fatty Acid market sentiments buoyant in the forthcoming weeks. With stabilized inflationary pressures and increased wage demands, the market remains under significant strain. The unchanged export tax and levy in Indonesia, along with Malaysia's rising production and export adjustments, are additional factors influencing the market dynamics.