Europe Palm Kernel Oil Prices Strengthen in the first quarter of 2024

Throughout the first quarter of 2024, prices of various oilseeds, including Palm Kernel Oil (PKO), remained elevated. Palm Kernel Oil is a sustanaible oil widely used in food, cosmetics, personal care products, and animal feed. This continuous price increase of PKO was driven by adverse El Niño weather conditions, export restrictions, and higher biofuel mandates, significantly impacting the global supply chain momentum for Palm Kernel Oil.

Various merchants within exporting nations such as Malaysia and Indonesia have stated that the El Niño weather phenomenon, which brought dryness to large parts of Asia this year, is forecasted to continue until the end of the first half of 2024 (March 2024), putting at risk supplies of various staple products and oilseeds, including Palm Oil, its related oils such as Palm Kernel Oil, and other farm products in some of the world's top agricultural trading nations, thereby keeping their prices on the upward trend. One of the supporting factors is the recent reduction in the production of Palm kernel oil within producing nations, supported by the limited availability of palm fruits due to dry planting conditions and shrinking reservoirs likely to cut yields.

Concurrently, across European nations, the Euro Area economy shows signs of recovery, marked by improved business and consumer sentiment in February. Although inflation has resumed its downward trajectory, persistent service prices pose challenges to the European Central Bank's policy decisions. Southern European hub terminals demonstrate stable performance, with positive operational outcomes, including ongoing yard repairs. Conversely, northern hub terminals grapple with compounded challenges stemming from delayed networks due to the Red Sea situation and adverse weather conditions in the Bay of Biscay in late February and early March. As Europe encounters winter weather conditions, minor supply chain disruptions are noticeable.

The cumulative impact of these events has resulted in an erratic flow of cargo, impacting import momentum. Additionally, the continuous increase in the import prices of Palm Kernel Oil is further exacerbated by currency depreciation observed even in March 2024. As the euro depreciates against the dollar towards the end of March, buyers are compelled to purchase or import materials at elevated costs. This trend is attributed to the sustained growth witnessed in various end-user sectors for Palm Kernel Oil.

Traders and market experts expect demand from end-user industries for Palm Kernel Oil to continue to rise with limited stocks in the warehouses in the approaching months. As a result, they might continue to sell their goods at a higher rate and focus on immediate orders first. A substantial surge in inquiries from downstream oleochemical sectors, including fatty alcohols and oleic acid, however, signals an imbalanced demand-supply outlook for various products, including Palm Kernel Oil, for the forthcoming period as well.