Oleic Acid Prices Tumble in the US Amid Supply Glut and Market Volatility

Oleic Acid, an essential ingredient across diverse industries, has witnessed a substantial price downturn over the last month in the US market. This downward movement for Oleic Acid persists into September, generating keen interest and apprehension among stakeholders and experts within the sector. Several pivotal factors, encompassing supply and demand disparities, fluctuations in raw material expenses, global economic instability, logistical hurdles, and seasonal patterns, have collectively contributed to the decline in Oleic Acid prices throughout August, thus laying the groundwork for the ongoing trend in September.

One of the key factors contributing to this Oleic Acid downturn is the supply-demand disparity. The production capacity of Oleic Acid has experienced a notable increase in recent months, leading to an excess supply of the compound. Concurrently, the surge in supply has not been matched by a corresponding rise in demand, which has consequently driven down Oleic Acid prices. Logistics and transportation bottlenecks have exerted a discernible influence on the pricing dynamics of Oleic Acid. Protracted supply chain interruptions and delays can escalate inventory for Oleic Acid holding expenses for manufacturers, thereby exacerbating downward price pressures.

Businesses have strategically optimized their inventory management for Oleic Acid to minimize potential risks and harmonize with prevailing market dynamics, resulting in reduced procurement quantities. Simultaneously, exchange rate fluctuations can substantially influence Oleic Acid pricing, particularly in markets heavily reliant on international trade.

The cost of essential input materials for Oleic Acid manufacturing, notably vegetable oils focusing on palm oil, has encountered price volatility. Malaysian palm oil futures displayed a downturn in value due to a trading range characterized by the anticipation of increased supply in the world's second-largest palm oil producer, coupled with subdued demand. Meanwhile, production levels are experiencing seasonal growth in Malaysia, further contributing to market dynamics both in the domestic as well as international markets.

Malaysia, a major exporting country, witnessed a notable rise in raw material palm oil inventories, reaching a five-month high due to increased production, as reported by the country's palm oil board. Indonesia and Malaysia jointly dominate the global palm oil trade, accounting for approximately 85% of the market share. The European Union typically ranks as the third-largest importer, following China and India. In an effort to address issues about the implementation of the EU Deforestation Regulation (EUDR), Indonesia, Malaysia, and the EU have agreed to establish a specialized task force. The task force, formed by the Indonesian Coordinating Ministry for Economic Affairs, will collaboratively tackle challenges related to EUDR compliance. According to data from the US Foreign Agricultural Service, the EU is projected to import around 8.9 million metric tons of vegetable oils in the 2023-24 marketing year, with palm oil imports expected to reach 4.8 million metric tons.

As we conclude the third quarter, there is a significant likelihood of a global resurgence in Oleic Acid prices. The export of Malaysian palm oil products may experience an upswing ranging from 5.9% to 17.5%. It is important to note that palm oil is intricately tied to price dynamics in closely associated oils, all vying for a larger share of the global vegetable oils market. India's growing appetite for palm oil, driven by escalating discounts on soy oil and sunflower oil, presents a notable demand surge. This surge, in turn, could potentially aid Indonesia and Malaysia in reducing their palm oil inventories.