Declining Palm Oil Stocks and Improved Demand Drive Up US Stearic Acid Prices

In the first half of August 2024, the US Stearic Acid market saw a modest uptick of about 0.7%. This rise was fueled by improved demand conditions observed in July. Despite these gains, economic uncertainties and a slowdown in the US manufacturing sector kept procurement activities for Stearic Acid relatively subdued. The market received some support from Southeast Asian countries, particularly Indonesia and Malaysia, where production of Stearic Acid increased. Additionally, a 1.5% rebound in the prices of Palm Oil, a key feedstock, provided further strength to the US market.

However, production costs have been on the rise. Data from the Malaysian Palm Oil Board indicated that palm oil stocks in Malaysia fell by 5.35% in July, hitting a four-month low. This decline, coupled with severe congestion at major Asian ports, led to a 50% reduction in container bookings, thereby increasing production costs for Stearic Acid.

On the demand side, the US market displayed positive trends. Vehicle sales rose by 4.2% month-on-month in July, reaching an annualized rate of 15.8 million units, which was in line with forecasts indicating positive demand conditions for Stearic Acid. Although unadjusted sales volumes were 2.0% lower than the previous year, there was a notable increase in passenger vehicle sales, up 9.1% month-on-month, and light-truck sales, which grew by 3.1% month-on-month. Light-trucks made up 81% of total sales, a slight increase from the previous year.

Nevertheless, the growth of electric vehicles (EVs) has lagged expectations due to elevated borrowing costs, persistent economic uncertainty, and a shift in consumer preference towards gasoline-electric hybrids. This situation prompted Tesla and other EV manufacturers to reduce prices and offer more incentives to attract buyers, which highlighted concerns within the downstream rubber industry that relies on Stearic Acid.

In the manufacturing sector, the start of the third quarter saw a deterioration in business conditions. New orders declined for the first time in three months, and input costs surged due to higher prices for energy, freight, labor, and raw materials. Despite this, inflation rates eased to a four-month low, and manufacturers only slightly increased their selling prices as they aimed to stay competitive. Purchasing activity decreased for the second consecutive month, as firms were reluctant to buy additional inputs amid falling new orders and rising costs.

Looking ahead, the Stearic Acid market is expected to continue experiencing price increases. This is due to the anticipated further decline in palm oil stocks and the rising demand for biodiesel, which is expected to drive up Stearic Acid production. Additionally, with the festive season approaching, procurement activities are projected to rise, likely leading to further increases in Stearic Acid prices.