Towards the beginning of December 2024, Stearic Acid prices have defied the usual seasonal slowdown, continuing their upward trajectory across Southeast Asian export markets. This unexpected price rise is impacting European and North American imports, with prices reflecting higher production costs. The primary driver behind this price surge is the escalating cost of Palm Oil, which has been on the rise since September due to policy shifts and a decline in Palm Oil production.

As the Palm Oil sector enters its off-season during December, supply shortages have led to an inflationary effect on Stearic Acid prices. This shortage, compounded by adverse weather in Southeast Asia, has resulted in limited Stearic Acid production. Recently, Palm Oil prices jumped 6%, with the February 2025 benchmark contract on the Bursa Malaysia Derivatives Exchange rising by 32 ringgit (0.65%) to 4,987 ringgit ($1,116.16) per metric ton by midday (11.12.2024). This price spike is driven by persistent supply disruptions and policy shifts, including severe flooding in Malaysia, which has added uncertainty to the Palm Oil market. The floods, described as the worst in a decade, have raised fears of long-term production slumps, further tightened global Palm Oil supply and increased production costs for Stearic Acid.

According to the Malaysian Palm Oil Board (MPOB), Malaysia's Palm Oil stocks fell 2.6% to 1.84 million metric tons at the end of November, with Crude Palm Oil production declining by 9.8% to 1.62 million tons, the lowest since 2020. In Indonesia, speculation surrounding the government's plans to increase export taxes in December has driven prices up, as exporters anticipate higher costs. This has tightened supplies and kept prices high, further exacerbated by increased domestic demand due to the B35 biodiesel mandate. Additionally, weather-related production declines of up to 1 million tons are expected, further restricting global Palm Oil supply and inflating Stearic Acid production costs.

In November, the MPOB also raised Malaysia's Palm Oil export duty from 8% to 10%, intensifying cost pressures in global markets. Moreover, a 9.3% to 10.4% drop in Malaysian Palm Oil product exports has further constrained global Stearic Acid supply. By early December, Stearic Acid prices across Malaysia reached $1310/MT FOB Klang, a 1% increase from the previous week with these prices being assessed at historically high levels

While demand for Stearic Acid remains mixed globally, conditions are improving in Asia and North America but remain subdued in Europe. Southeast Asia’s rubber market, a key consumer of Stearic Acid, is facing moderate demand due to the impact of severe flooding on natural rubber production. The floods, driven by the Northeast Monsoon, have disrupted

rubber production in key Malaysian states and are expected to continue hampering supply in Malaysia and Thailand due to the ongoing La Nina season.

On a more positive note, the automotive sector in Southeast Asia has seen a slight uptick in demand for Stearic Acid. In Malaysia, the automotive sector is buoyed by strong year-end promotions and an estimated total industry volume (TIV) of 800,000 vehicles, reflecting robust demand for national cars.

In the U.S., Stearic Acid demand from the automotive sector showed slight improvements, driven by a 1.32-million-unit sales figure in November, exceeding expectations and signaling a potential annual sales pace of 16.5 million vehicles. However, a backlog in the market is still limiting price gains. By early December, Stearic Acid prices in the U.S. reached $1490/MT CFR New York, a 2% increase from the previous week at historically high levels.

In Europe, the automotive sector showed only moderate demand, with suppliers continuing to liquidate inventories during the extended holiday period. The outlook for the remainder of the year is subdued, with weak performance in the terminal rubber sector and a slight decline in new car registrations in November, according to Germany’s Federal Motor Vehicle Office (KBA). New passenger car registrations in Germany totaled 244,544 units, marking a 5.4% month-on-month increase but a slight 0.5% decrease year-on-year. By early December, Stearic Acid prices across Europe reached $2020/MT CFR Hamburg, a 1% increase from the previous week.

As December 2024 draws to a close, Stearic Acid prices are set to continue their upward trajectory, driven by ongoing Palm Oil production shortages. With Palm Oil still in its off-season, Stearic Acid production remains constrained, leading to supply scarcity. Additionally, Indonesia's Ministry of Energy and Mineral Resources (ESDM) has announced plans to establish seven to nine new biodiesel plants to meet production targets for B50 fuel, a blend containing 50% Palm Oil-derived biodiesel. This move is expected to further tighten Palm Oil supply, pushing Stearic Acid prices higher in the coming weeks. These factors are not only contributing to limited Stearic Acid production but also increasing its production costs, reinforcing the expectation that global Stearic Acid prices will continue to rise in 2025.