Fatty Alcohol Prices Hit Record High in Major World Economies Following Feedstock Crisis and Trade Turbulences

The fatty alcohol market could be seen lumbering in many important economies of the world, during the start of the 2021 fourth quarter, on account of several disturbances in the production and logistics sectors creating a wide gap in the supply-demand channels.

As per the ChemAnalyst database, the fatty alcohol price in China, which was already on the upward trend since the setting in of quarter-three of the running year, shot up sharply on October 22 reaching USD 3,740 per tonne after registering a whopping 55% hike from the price recorded merely two-weeks back and a 170% hike from its price in the October last year. Indian fatty alcohol market has also been experiencing price shocks since the third quarter that got extended to the fourth quarter, which is evident from the 40% rise in the fatty alcohol price in October (settling at USD 2,667 per tonne) from the price recorded in June. The surging fatty alcohol prices in European countries and the USA reflect similar market dynamics in these regions as well.

The ubiquitous supply shortage of palm oil feedstock at the production sites is the major driving factor of the price rise. The feedstock palm oil is an edible oil produced from the fruits of oil palm trees. Indonesia and Malaysia account for 84% of the global palm oil production volumes. Since Indonesia’s climatic conditions support extensive palm oil production (57% of the global production), it is the primary manufacturer and the highest exporter of fatty alcohol across the world. The uncertainty in agricultural palm oil production is the prominent reason for palm oil price volatility and its low availability that hampers the production of fatty alcohols across the globe.

China, which is not untouched by this phenomenon, had been experiencing a rise in fatty alcohol prices since long due to the crunch in palm oil supplies in China and in Indonesia from where huge volumes of fatty alcohol are imported by the Chinese provinces. The situation got further exacerbated due to the low-running coal inventories causing energy disruptions and the recent torrential rains in the Shanxi province that has forced the production units to either shut down or slow down operations.

The rising price trend in India is also backed by the prolonged supply shortage in the upstream palm oil along with the disturbing imports from the low availability of shipping containers on ports. The unresolved logistic issues have affected the fatty alcohol market in Europe and the USA as the spot market prices in these regions have been spiralling following the port congestions.

Fatty alcohols, the major segment of oleochemicals, are extensively used to produce surfactants that are distinctively used in industrial and domestic cleaning, personal care, lubricants, plasticizers, pharmaceutical formulation, and food and nutrition.

As per ChemAnalyst, the global demand for fatty alcohol is expected to rise at a CAGR of around 4.5% owing to the increasing preference for biodegradable emulsifiers in personal care products that holds a huge consumer base in the Asia Pacific region. The firm demand for fatty alcohols across the end-user industries is expected to further enhance the ongoing supply-demand friction in the fatty alcohol market. Given that the limited palm oil availability and unabated rise in freight charges do not seem to ease out soon, these factors will continue to fuel the inflation in fatty alcohol prices at a global level for the remaining fourth quarter.