Gelatin Market Shift: Prices Poised to Drop as Supply Rises and Shipping Costs Ease

Gelatin prices in the US are expected to decrease by the end of August, mirroring the trend seen in the previous month. This anticipated decline is influenced by several factors, including a drop in demand from end-use sectors, reduced freight rates, and an ample supply of Gelatin. In response to these conditions, some sellers have begun reducing their Gelatin prices to bolster market stability.

Two major U.S. companies, Nitta Gelatin USA, Inc. and Bamni Proteins Ltd., halted their production—Nitta Gelatin USA, Inc. due to profitability issues and Bamni Proteins Ltd. due to local pollution control regulations. This shutdown prompted Asian manufacturers to increase their production in an effort to control the market, which flooded the market with overall increased supply, which could further put downward pressure in Gelatin prices.

The recent 15% decrease in shipping prices from Asia to North America's West Coast, coupled with easing demand and increased capacity on this trade route, could significantly contribute to a decline in Gelatin prices in the USA. The overcapacity issue, stemming from an early peak season where shippers rushed to front-load holiday season products, has left carriers with excess space, making it difficult for them to maintain higher rates. As a result, even with potential rate increases scheduled for mid-August, the softening demand and abundant shipping capacity are likely to prevent these hikes from sticking. Lower shipping costs directly reduce the overall cost of importing Gelatin from Asia, which, combined with improved supply chain efficiency, would likely drive down prices in the US market.

The situation is further complicated by importers pulling forward shipments of goods from China in anticipation of tariff increases slated for August 1st. This early influx of goods, combined with the threat of a US East Coast port strike, prompted importers to build up inventories beyond typical levels. As a result, the market now faces an oversupply situation, with stockpiled inventories potentially exceeding current demand, which could exert additional downward pressure on Gelatin prices in the USA.

Moreover, the improvement in water levels at Gatun Lake in Panama, coupled with the easing of weight restrictions by local authorities, is creating a more favourable shipping environment. These developments are expected to reduce transportation costs, which could further contribute to a decrease in Gelatin prices in the USA.

According to ChemAnalyst, projections indicating a decline in US imports starting in September are fuelling expectations of further reductions in shipping rates. This anticipated drop in import volumes, combined with the already easing demand and overcapacity, could contribute to additional declines in Gelatin prices. As the industry has adapted to the Red Sea disruption, the potential resolution of union disputes on the US East Coast is seen as the final hurdle before a significant correction in freight rates. Once this correction occurs, it would likely further reduce the costs associated with importing Gelatin, amplifying the downward pressure on prices in the US market.