Heightened Freight Charges Leads the US Stearic Acid Prices to Incline in December 2023

The overall market situation of Stearic Acid (Rubber Grade) remained bullish in the US market throughout the second half of December 2023 with prices observing an overall appreciation of approximately 1%, as prices of Palm Oil (feedstock of Stearic Acid) also continued to incline with prices appreciating by approximately 2.5% which increased production costs. The prime reason for the elevated prices of Stearic Acid is largely attributed to the increased demand from the downstream rubber sector of the automotive industry and inflated freight charges which were recorded to have increased by more than 23% at the week ending December 29, 2023, with further appreciations expected as base prices are anticipated to increase in coming month by key shipping companies. Recent attack on shipping vessels in the red sea by Houthi Rebels has raised global concerns, which has been putting pressure on insurance costs on sea cargoes. Further, some key international producers have also alleged that some shipping companies are trying to take advantage of this situation by increasing their freight charges.

Automotive sales continued to surge in the US market which saw an increment of approximately 13% in sales on the back of the festive season, which continued to pressure the existing inventories of Stearic Acid (Rubber Grade). Moreover, price increments in the Stearic Acid were also complemented by increasing freight charges and insurance premiums as attacks on the Red Sea and congestion in the Panama Canal extended in January 2024. The demand for Stearic Acid (Rubber Grade) was also recorded to be healthy in December 2023, mostly due to increased demand from the winter tire industry due to the prevailing winter season.

The current economic situation in the United States mostly pictures a depressing outlook on the demand for Stearic Acid across the United States with inflation rates presently increasing to 3.1% according to FRED which was still above the target corridor according to the Federal Bank. The Federal Bank continues to maintain the cautious observation of inflation rates with uncertainties largely prevailing on the decision to increase interest rates in January 2024. Manufacturing services also witnessed a softer downturn in December 2023 leading to overall cautious sentiments of investment.

Overall prices of Stearic Acid are expected to appreciate despite the prevailing dullness post-festive season largely due to increasing prices of feedstock Palm Oil across the exporting Indonesian market and uncertain conditions of the major trade routes which are also expected to keep freight charges high. This is expected to compel US merchants to place limited orders of inventories of Stearic Acid to the exporting Indonesian market which is anticipated to cause limited inventories of the product in circulation.