The opening week of February 2025 witnessed a stability in Stearic Acid prices across the US and European markets but a rebound across the Southeast Asian markets, following a prolonged bearish market sentiment since mid-December 2024. Low supplies and the recovery in production costs, particularly the increases in feedstock palm oil prices, continued to drive Stearic Acid market conditions, despite the decline in freight charges, which had been anticipated to maintain a subdued pricing environment across the European and North American importing markets.

In late January 2025, prices of feedstock palm oil rose by approximately 2.3%, pushing Stearic Acid production costs higher across the global market. The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives closed higher on Friday, with the April 2025 benchmark contract surpassing RM4,500 per tonne, driven by concerns over weak output and anticipated demand ahead of Ramadan. This, in turn, caused trading volume to jump to 100,050 lots from 80,473 lots during the week ending February 7, 2025, while open interest widened to 227,401 contracts from 223,563 previously, pushing palm oil prices higher across the market.

Production concerns persist, with Malaysian palm oil output expected to decline by about 13%-15% in February due to rains and floods across the country, driving expectations of lower Stearic Acid production. This is corroborated by the fact that Malaysia's palm oil stocks fell 7.55% in January from December to 1.58 million metric tons, the lowest level since April 2023.

A corroborating factor for lower circulation of Stearic Acid across the global market is highlighted by the fact that exports of Malaysian palm oil products for January are estimated to have fallen between 12.3% and 20.1% from the previous month, according to cargo surveyors Intertek Testing Services and independent inspection company AmSpec Agri Malaysia.

This consequently led to lower volumes of inventories of Stearic Acid entering the North American and European markets, despite freight charges depreciating by approximately 1% from Asia to North America and by 5% from Europe to Asia.

At present prices of Stearic Acid across the European and North American markets were assessed to have been constant during the opening week of February 2025 but a rebound of approximately 0.5% across the exporting Southeast Asian market.

Across the North American market, demand conditions were reported to be moderate to lower as market participants awaited clear indications of direction. Demand For Stearic Acid from the downstream rubber industry remained subdued, although some inquiries were heard from the downstream winter tire industry due to the peak winter season. In the primary downstream automotive sector, January vehicle sales in the US dropped 7.5% month-on-month to 15.6 million units, falling short of expected levels due to post-festive sluggishness, extreme weather conditions, and disruptions in Southern California.

Across the European market, however, demand conditions for Stearic Acid remained subdued despite low supplies, with automotive sales down by 2.8% in January, as reported by KBA, accompanied by minimal logistical disruptions apart from intra-European trade lines, with Northwest European ports continuing to report congestions.

However, expectations of higher Stearic Acid prices prevail across the global markets with low supplies being witnessed. Moreover, EU regulations requiring proof of deforestation-free supply chains, according to EU Commission import figures reported by Germany’s Union for the Promotion of Plants and Protein (UFOP), have made it difficult for Southeast Asian suppliers to supply Stearic Acid to the European market. Expectations of further tightness in Stearic Acid circulation are anticipated due to higher demand for palm oil and lower Stearic Acid production across Southeast Asian markets ahead of the upcoming Ramadan festivities, further exacerbated by the EU Deforestation Law.

However, some easing of cost pressure for Stearic Acid is expected as Indonesia has set its crude palm oil (CPO) reference price for February at $955.44 per tonne, down by $104.10 per tonne from January’s $1,059.54 per tonne, according to a decree by the trade ministry on Friday, January 31, 2025.