Global Supply Chain Challenges keep Fatty Acid Prices Elevated across US and China

The global market for Fatty Acid continues to face upward pressure, with prices remaining elevated in both the United States and China. This surge can be attributed to a combination of factors, including rising palm oil prices, increased demand from downstream industries, and ongoing supply chain disruptions.

In China, the domestic market for Fatty Acid witnessed a significant price increase in the second half of September, primarily driven by the surge in palm oil prices. The rise in palm oil prices was influenced by various factors, such as positive export data from Malaysia, upward movements in futures contracts, and increased spot market activity. Despite Malaysia's palm oil inventories reaching their highest level in eight months, the overall market remained bullish due to strong demand.

The combined effect of these factors created a demand-driven market where demand outpaced supply, resulting in higher prices for both palm oil and Fatty Acid in China.

In the United States, the prices of Fatty Acid have also remained on the higher side, primarily due to persistent inquiries from the downstream personal care sector. The ample availability of palm oil, a key raw material for Fatty Acid production, has helped maintain stable market conditions and ensure sufficient supply to meet industry demands. The upward trend in Fatty Acid pricing suggested a well-balanced relationship between supply and demand in the industry.

Considering freight, industrial unrest and capacity constraints in key regions created challenges for ocean freight. In August, the Canadian government ended rail strikes and prevented labor problems in India, but there were still threats associated with unresolved difficulties in Germany and recent negotiations with US East Coast port workers. Although there is reduced demand for ocean freight, the supply is still being strained by port congestion, a lack of equipment, and rerouting around the Cape of Good Hope. Though they have mostly normalized, freight prices are still higher than they were before the COVID outbreak. Pricing for Fatty Acid may be impacted by seasonal rate reductions before China's Golden Week and anticipated attack across red sea, with possible rate hikes in Q4 driven by peak season demand.

Looking ahead, the prices of Fatty Acid are expected to remain elevated in both the United States and China. The tightening supply of palm oil, coupled with increased demand from the downstream detergent and surfactant industry, is likely to drive Fatty Acid prices upward. Additionally, rising domestic consumption of palm oil in China will further contribute to the rise in Fatty Acid prices.