Volatile Feedstock and freight influence Stearic Acid prices across Europe and US

In the second week of June 2024, Stearic Acid prices in the US rose by approximately 0.8% due to ongoing disruptions in ocean freight rates and fluctuating prices of Palm Oil, the primary feedstock from Southeast Asian markets such as Malaysia and Indonesia.

During May 2024, Palm Oil prices saw a notable decrease of around 9%, with continued volatility observed into early June, contributing to uncertainty in production costs of Stearic Acid. Malaysia's palm oil stocks saw a slight increase at the end of May, rising by 0.5% from April, driven by a 14% month-on-month increase in crude palm oil production to 1.7 million tonnes, coinciding with peak harvest season. This increase is expected to further lower Stearic Acid production costs, facilitating competitive exports to North American and European markets.

Meanwhile, Indonesia's palm oil exports in May 2024 totalled 1.72 million tonnes, marking a 4.2% decline from April, though annual output is projected to rise by 5% to 57.6 million metric tons for the year, driven by maturing crops, as reported by the Indonesia Palm Oil Association (GAPKI). These dynamics contribute additional uncertainty to Stearic Acid production costs.

Congestion at crucial Asian trade routes, notably the Strait of Malacca and Singapore port, has intensified disruptions in supply chains, resulting in a more than 50% increase in freight charges, which continued to influence the prices of Stearic Acid globally. Recent market analysis indicates that spot rates for shipping full-size containers from Asia to the US and Europe have once again risen, with rates exceeding USD 6,000 for a 40-foot equivalent unit (FEU) on three major routes, namely East China to us East Coast, East China to North Europe and across Asia affecting transits of shipments of Stearic Acid to North America and Europe.

Despite these challenges, demand for Stearic Acid from the downstream rubber industry remains weak, influenced by stagnant electric vehicle (EV) sales in the US and Europe. In the US, EV and hybrid vehicle sales declined to 18.0% of total new LDV sales in the first quarter of 2024, down from 18.8% in the previous quarter, according to data from the EIA. Similarly, in the European Union, new battery-electric car sales dropped by 12% in May compared to the previous year, notably declining by 30% in Germany, where early 2024 subsidy cuts contributed to a year-to-date 16% decrease in EV sales, according to the European Automobile Manufacturers Association (ACEA) which continued to be drag on the demand conditions of Stearic Acid.

Overall prices of Stearic Acid are expected to incline mainly influenced by rising freight charges across Asia, despite the availability of feedstock Palm Oil being in season, which may impart downward pressure.