Supply Strain and Growing Appetite Drive European Gelatin Prices Northward

The Gelatin prices in the European market are anticipated to increase in January 2024, deviating from previous month’s trend of 2023. A key factor driving this change is the upswing in demand for Gelatin from downstream industries, especially the food sector, following the conclusion of the holiday season in December. This surge in demand may exert pressure on the supply chain, potentially leading to a rise in Gelatin prices. With the expected price hike, market participants may opt for stockpiling Gelatin to ensure a stable supply, adding further pressure on prices and contributing to an upward trajectory.

A key determinant affecting Gelatin prices is the potential escalation of disruptions in the global supply chain. The mounting tensions in the Red Sea, particularly as the UK and US target Houthi sites, raise concerns about the prospect of a full-blown crisis that could jeopardize the global economic recovery. In such a scenario, Europe and its inhabitants may anticipate increased energy costs, shipment delays, and a resurgence of inflation, leading to elevated and prolonged interest rates. These unfolding events pose added challenges for the average consumer and local businesses, exerting an impact on Gelatin pricing.

The escalation of tension has already spurred a surge in oil prices, with Brent reaching the significant threshold of $80 (€73.12). Recent freight data indicates that disruptions in the Red Sea might force oil tankers to take longer routes, impacting major global shipping lanes such as those from India to Europe and the Middle East to Europe. This timing is particularly inopportune, especially as winter takes hold in Europe, potentially causing disruptions in energy supply. Such disruptions could directly impact manufacturing and shipping costs, subsequently contributing to a rise in Gelatin prices.

The recent data suggests an improved outlook for European inflation, but there remains a considerable journey ahead. In Germany, Consumer Price Index (CPI) surged to 3.8% in December, exceeding November's 2.3%. Similarly, France witnessed a rise in CPI to 4.1% in December, up from the November figure of 3.9%. The disruptions could result in a further increase in inflation for Europe, delaying a rebound from a severe economic slowdown in the region. To counteract this, the European Central Bank (ECB) may find it necessary to maintain higher interest rates for an extended period to ensure the sustained effectiveness of its anti-inflation measures. This, in turn, might result in increased borrowing costs for businesses, leading to heightened production expenses that could be passed on to consumers through higher prices, consequently supporting an upward trajectory in Gelatin prices.

According to the analysis conducted by ChemAnalyst, the prices of Gelatin are anticipated to see a further increase, attributed to sustained demand from end-user industries and economic factors. The positive demand outlook is expected to prompt market participants to propose higher prices, contributing to an overall optimistic market sentiment for Gelatin.