May 2024: High production Costs Affects Alkyl Ether Sulfate Prices in South Korea

Throughout the initial half of May 2024, there was a noticeable uptick of about 4% in the prices of Alkyl Ether Sulfates (AES) within the South Korean market. This surge persisted mostly due to increasing prices of Fatty Alcohol across the Asian market. Prices of Fatty Alcohol were recorded to have increased by approximately 6% during the first half of May 2024, which consequently led to high production costs of AES.

The South Korean AES market experienced challenges primarily stemming from escalating freight charges. Since the onset of May 2024. Freight costs, particularly from the US East Coast, have soared by approximately 17%, leading to expensive inventories entering the South Korean market and subsequently driving up production costs for AES.

There was a broad stabilization of production levels in April, with output up fractionally at the start of the second quarter of the year. As such, production has now increased in three of the past four months, hinting towards positive production activities of AES and in the downstream soap and detergent industry. Inflationary pressures continued to build at the commencement of the Q2 of 2024. Input price inflation quickened from March to reach a five-month high, as manufacturers reported rising raw material, oil, and logistics costs which may have affected the prices of AES across South Korea.

Simultaneously, demand for AES from the soap and detergent industry in South Korea witnessed a decline owing to the diminishing number of refill stations in major retail chains. Regulatory obstacles and limited consumer accessibility were contributing factors to this downturn. Despite commendable initiatives like Emart's Eco Refill Stations introduced in 2020, which featured vending machines for eco-friendly detergent refills, the count of stations has plummeted from 13 in 2022 to just 2 in May 2024. Moreover, major retail chains like Homeplus have shuttered all Zero Market refill store outlets, while Lotte Mart now offers only limited refill options for detergent and shampoo.

Overall prices of AES across South Korea are anticipated to further increase due to expected increments in the prices of Fatty Alcohol across the Asian market, complemented by rising freight charges.  Moreover, increments in the prices of upstream Crude Oil due to voluntary production cuts announced by OPEC members towards the end of the second quarter of this year which may drive up prices of another feedstock Ethylene Oxide which may further prompt production costs of AES to rise across the South Korean market.