Fatty Alcohol Prices Rise as Palm Oil Supply Tightens: Asian market Faces Price Pressure
13/11/2024 (Chemanalyst) - The prices of Fatty Alcohol, a vital ingredient in the production of cosmetics, detergents, and industrial applications, have been steadily increasing in recent weeks across major exporting nations such as Indonesia and Malaysia. As both countries account for over 80% of global palm oil supply, the rise in Fatty Alcohol prices is a direct reflection of the pressure on palm oil prices, which have surged in recent months. Countries like India and China, major importers of Fatty Alcohol, are also witnessing similar price increases due to their reliance on imports from these key producers.
The root cause of these rising prices is the growing strain on palm oil supplies. Palm oil is the primary feedstock for Fatty Alcohol production, and several factors are contributing to its tightening availability. In Indonesia, the world’s largest palm oil producer, the government’s ambitious biodiesel program is playing a significant role. The Indonesian government has ramped up its biodiesel mandate, known as B35, which requires a 35% palm oil blend in diesel. This mandate is scheduled to increase to 40% by 2025, and further to 50% by 2028. These mandates are diverting palm oil from the export market to domestic use, significantly reducing available supply for countries like India and China.
The increased domestic demand for palm oil in Indonesia is compounded by a surge in imports from India. India’s palm oil imports skyrocketed by approximately 60% in October, driven by robust demand during the festive season, including Diwali and Dussehra. As a result, palm oil stocks in key producing countries like Indonesia and Malaysia are being drained to meet the demand from India and other regional buyers. While Indonesia and Malaysia have continued to meet the needs of these importing nations, the rising consumption in India and expected reductions in palm oil exports have led to bullish market sentiment, pushing up Fatty Alcohol prices.
Although Fatty Alcohol prices have remained relatively stable weekly in late October, analysts predict that the price increases will continue into early 2025. The combination of rising biodiesel mandates, limited palm oil supply, and robust demand is expected to push palm oil prices up by as much as 15%. Fertilizer shortages, which have further hindered palm oil production in Southeast Asia, are also contributing to the supply constraints.
ChemAnalyst pricing intelligence indicates that a significant price hike for Fatty Alcohol is anticipated in early 2025, particularly if Indonesia enforces its new biofuel quotas. As palm oil costs continue to climb, manufacturers in the Fatty Alcohol market will face higher input costs. This is expected to create continued upward pressure on Fatty Alcohol prices, particularly in the personal care, detergent, and industrial sectors.
Looking ahead, the ripple effect of rising biodiesel mandates, tightening palm oil supplies, and strong demand from markets like India and China will continue to push Fatty Alcohol prices higher in Indonesia and Malaysia.