Global Tall Oil Prices Surge in July 2023 Amidst Strong Demand and Limited Supply

The prices of Tall Oil increased in the global market in July 2023. The factors responsible for this upward trend include an increase in demand from end consumers amid limited supply in the market. In addition, weaker trading activities further supported this upward trajectory. 

Tall Oil, also known as liquid rosin or tallol, is a viscous, dark, odorous liquid by-product of the kraft process (chemical process to produce wood pulp from wood) of paper manufacture, used after refining to make coatings, paint, varnish, sizing for paper, linoleum, drying oils, lubricants, emulsions, and soaps. Recently, there has been an increase in demand from these end-user industries, including paper, pulp, and mining industries, resulting in high prices for Tall Oil.

The prices of crude Tall Oil mimicked the previous month's trend after Russia, the world's main exporter, announced that it would begin cutting oil production in July 2023 in order to maintain the stability of the oil market. Additionally, OPEC+ (Organization of Petroleum Exporting Countries) countries have also agreed to extend the oil production cuts they announced in April until the end of 2024, decreasing the amount of Oil they pump into the world. This tightened the market condition, resulting in decreased supply of Tall Oil in the global market.

In the US, the manufacturing Purchasing Managers' Index (PMI) was 46.4% in July, which was 0.4% higher than June's reading of 46%. This month's PMI reading indicates that the economic activity in the manufacturing sector declined for the ninth straight month in July, following 28 months of expansion. It suggests that production activity decreased, resulting in an insufficient stock of Tall Oil in the US market. However, the increasing demand for Tall Oil from end-users has kept Tall Oil prices on the higher side.

China's manufacturing PMI improved in July and stood at 49.3 from 49 in the previous month, as per the National Bureau of Statistics. However, it is slightly gone up but remained below 50-mark, which indicates less inventory level among market participants and delayed delivery time that pushed the prices upward. The market demand is expanded, and more enterprises moved to replenish their inventories. The United States is the main importer of Tall Oil in China. The imports in China fell by 12.4% in July, which decreased the supply of Tall Oil in the Chinese market, supporting the upward trajectory of prices.

As per the ChemAnalyst analysis, the prices are expected to decline in upcoming months as the upward trend of Tall Oil prices would be limited by concerned demand outlook from end sectors. Also, the trading activity might improve, leading to more supply in the market, further keeping the market unfavorable.