Sour Outlook: Lactic Acid Prices Set to Tumble Amid Market Glut

By the end of August, Lactic Acid prices are projected to trend downward in the global market, influenced by multiple factors. This expected decrease is due to reduced demand from end-use sectors, fluctuating freight rates, and a plentiful supply of Lactic Acid. In response to these conditions, some sellers have started lowering Lactic Acid prices to help stabilize the market.

China has recently seen a notable decline in Lactic Acid prices, driven by a combination of interrelated factors. The manufacturing sector across Asia experienced reduced activity due to weakened demand on both domestic and international fronts. This softened demand caused a slowdown in production, leading to an oversupply of Lactic Acid and exerting downward pressure on prices.

Moreover, the weakening prices of raw materials, particularly corn and corn starch, have also played a role in the downward trend of Lactic Acid prices. Currently, corn inventories in the southern market are at high levels, with downstream grain-consuming enterprises showing little urgency to replenish their stocks. As a result, traders are under increasing pressure to sell, which could keep corn prices depressed in the short term.

The situation has been further aggravated by the imposition of substantial import duties by major trading partners, including the European Union and the United States, on Chinese exports. These tariffs have significantly reduced Western demand for Lactic Acid, contributing to the accelerated decline in prices.

In the USA, the expected decline in Lactic Acid prices in August is driven by several factors related to ocean freight rates and logistical conditions. While ocean rates from Asia held steady at their mid-July peaks, the broader shipping environment is undergoing changes. The increased ease of securing allocations and spot bookings, along with projections of a decline in US imports starting in September, suggest an imminent reduction in freight rates. This trend is already evident, with rates from Asia to North America's West Coast dropping by 15% from their recent highs. Although some carriers have planned rate increases for mid-August, the combination of softening demand and greater capacity on this shipping route raises doubts about the longevity of these hikes. Additionally, the recovery of water levels at Gatun Lake in Panama and the relaxation of weight restrictions by local authorities are contributing to a more favorable shipping environment. These factors collectively indicate a likely decrease in transportation costs, which could, in turn, lead to lower Lactic Acid prices in the USA.

ChemAnalyst's analysis suggests that Lactic Acid prices are likely to keep declining, driven by continued weak demand from end-users. Additionally, several factors could influence this downward trend, including ongoing uncertainties in the Red Sea region, persistently high interest rates in Western markets, and increased tariffs on Chinese products imposed by the USA and Europe. These elements are expected to play a significant role in shaping the pricing trajectory of Lactic Acid in the coming period.