Market Disparities: Gelatin Prices Fall in Asia and US, Surge in Europe

In May, Gelatin prices exhibited a mixed trend globally due to various factors. In the Asian and US markets, prices fell as end users had ample inventories, reducing their need for further purchases. This cautious approach by buyers resulted in fewer market transactions, collectively lowering Gelatin prices. Conversely, in the European market, prices rose mainly due to global supply chain issues, which caused longer delivery times, driving Gelatin prices upward.

Recent data reveals an unexpected drop in China's manufacturing activity for May, with the official manufacturing purchasing managers' index (PMI) decreasing to 49.5 from April's 50.4, according to the National Bureau of Statistics (NBS). This three-month low was particularly disappointing following recent strong industrial activity. The main reason for this decline was a reduction in new orders and new export orders, both of which returned to contraction after two months of growth. This downturn has also led to a decrease in Gelatin prices.

In India, factory activities slowed in May 2024, though they still remained in expansion. Notably, May saw the highest level of positive sentiment among manufacturing firms in nearly a decade, indicating that market participants had sufficient inventories. However, growth in new orders and export orders slowed compared to the previous month, contributing to the decline in Gelatin prices. Additionally, due to the summer season and extreme heatwaves, market participants were clearing out old inventories due to concerns over shelf life and to make room for upcoming supplies, further lowering Gelatin prices.

Simultaneously, the US economy slowed in the first quarter, with growth decelerating and an unexpected rise in inflation. Recent data shows that US consumer sentiment dropped to a six-month low in early May, driven by increasing short-term inflation expectations. This shift in sentiment also contributed to the decline in Gelatin prices. At its May 2024 Federal Open Market Committee (FOMC) meeting, the Federal Reserve decided to maintain the overnight federal funds rate in the current range of 5.25% to 5.5%.

Conversely, the eurozone economy picked up pace in May, with significant increases in business activity and new orders halfway through the second quarter. This economic growth bolstered high demand for Gelatin among end-users, pushing prices up. Additionally, terminals in Northern Europe are facing line-up congestions due to adverse weather and service conflicts. These logistical challenges have caused delays and higher shipping costs, further driving up Gelatin prices. The situation in the Red Sea has also become more complex, with recent attacks spreading further offshore. As a result, many ships are taking detours, adding 7-14 days to their travel time. This rerouting leads to higher port fees, congested shipping routes, and an imbalance in container supply and demand, all contributing to increased Gelatin costs.

ChemAnalyst's assessment suggests that Gelatin prices would rise in the coming months, propelled by heightened purchasing by end-consumers. Central banks in Western regions might contemplate reducing interest rates, potentially alleviating financial pressures on consumers and further supporting the upward trajectory of Gelatin prices. Moreover, increased trading activity could impart additional momentum to the Gelatin market.