Agar-Agar Market Anticipates Price Hike Driven by Rising Demand and Supply Constraints

The prices of Agar-Agar are expected to rise globally by the end of October, influenced by several key factors. Increasing demand from end-user industries such as food & beverage, cosmetics, and pharmaceuticals, coupled with constrained supply, is a primary driver of this surge. In light of these conditions, some manufacturers and traders are likely to raise prices in an effort to boost profitability, which is expected to keep overall market sentiment optimistic.

The Golden Week holiday in early October in China could significantly impact Agar-Agar prices, particularly because of its essential role in food industries, including its widespread use as a gelling, thickening, and stabilizing agent in products like desserts, sauces, and dairy items. During this national holiday, many businesses, including those producing Agar-Agar, reduce or halt operations, leading to a temporary decrease in production. This reduced output can create supply shortages in the market. The holiday also affects logistics, causing delays in distribution and disrupting the overall supply chain. Additionally, as the holiday often coincides with festive periods where demand for food products surges, particularly those requiring Agar-Agar, any supply limitations can exacerbate the strain on availability. Consequently, market participants may raise prices to balance the increased demand against the reduced supply, driving a noticeable rise in Agar-Agar prices.

In India, the return of retail inflation to a nine-month peak of 5.5% in September, largely fueled by a substantial increase in food prices reaching 9.24%, is expected to considerably influence Agar-Agar prices in October 2024. The increasing inflation could lead to higher production costs for Agar-Agar, as manufacturers may face rising expenses for raw materials and labor. These increased costs are typically passed on to consumers, resulting in elevated prices for Agar-Agar in the market. Additionally, the upcoming festive season is expected to exacerbate this trend. The festivities often lead to production slowdowns due to labor shortages and operational disruptions, creating potential supply constraints that could further drive-up prices. Simultaneously, the demand for Agar-Agar is likely to increase during this period, as it is widely used in various food products and desserts associated with celebrations. The cosmetic industry may also contribute to rising demand, as festive sales often spur greater consumption of beauty products that utilize Agar-Agar as a key ingredient.

Japan's moderate economic recovery, characterized by growth above its potential rate, has created a virtuous cycle of increasing income and spending. As this cycle strengthens, buyer confidence improves, leading to heightened purchasing enthusiasm. This resurgence in demand can directly contribute to increased prices of products such as Agar-Agar, as buyers become more willing to place larger orders. Additionally, the yen's depreciation against the USD in October makes imports more expensive for Japanese buyers. This increase in import costs would likely be passed on to consumers, further pushing Agar-Agar prices upward in the domestic market.

ChemAnalyst predicts that Agar-Agar prices will continue to rise, supported by consistent demand from crucial end-user sectors. After the Golden Week, a boost in demand is anticipated, which is likely to further impact Agar-Agar pricing on a global scale. Additionally, western markets are experiencing a decrease in inflation and a relaxation of monetary policy, factors that could enhance overall demand and contribute to upward pressure on prices.