Traversing the Twists and Turns in Asia’s Oleochemicals Market

In the ever-evolving oleochemicals market, we’ve seen indications that the coming months may feel a bit like a roller coaster ride, particularly in Asia. While the market may be poised for fluctuations in supply and demand, our P&G Chemicals team is equipped with the expertise and agility to navigate the potential ups, downs, twists and turns alongside our customers, as we have for more than 180 years.

After weak demand and low prices for oleochemicals in the second half of calendar year 2023, both feedstock and oleochemical prices showed upward momentum in early 2024. The market was bullish due to expectations of low production based on the typical seasonal factors and El Nino-induced dryness. Overall demand showed positive signs vs. the second half of 2023, and optimism remained for continued recovery. What has been happening lately? What may transpire in the latter half of 2024?

In the past few months, overall inter-Asia and intra-Asia logistics have turned from bad to worse. More ships have been rerouted via South Africa’s Cape of Good Hope due to escalating tensions in the Middle East. Congestion has become more common throughout Asia’s ports, and in shipping lanes in India and the Middle East. The industry has seen a ripple effect on intra-Asia logistics reliability and availability.

Regarding feedstock, there has been a modest decline in optimistic sentiment about prices. El Nino, once anticipated to be a pivotal factor that might drive up prices for both feedstock and oleochemicals in Asia, has not materialized to the degree that some industry observers expected. Moderate El Nino is now expected and no significant impact to production seems likely.

Also, some estimates still point to a potential decrease in palm production due to the aging of palm trees but the outlook for both soybean oil and rapeseed oil production is more optimistic. Meanwhile, with the ongoing conflict in the Middle East, crude oil prices continue to fluctuate.

All of these factors are contributing to flux in the feedstock markets, which may be further impacted in the coming months as the sector continues preparing for implementation of the European Union Deforestation Regulation (EUDR).

On the demand side, all eyes are still on China, given a belief that recovery there will likely be followed by renewed demand elsewhere in Asia. This year began with subdued sentiment, reflecting demand that was low but stable. Now, there are notable indicators that demand is recovering.

Following China’s “Two Sessions” congress in March, the government has maintained its target of 5% GDP growth for 2024, with the potential for increased market and infrastructure investment (from new economic policies and the issuance of a 1-million-yuan national bond). The focus is expected to shift toward manufacturing and support for industry.

The scenario seems promising, as recent Gross Domestic Product (GDP) figures reveal that China’s economy expanded by 5.3% in the first quarter of 2024, surpassing the previous year’s average quarterly growth. However, many industry players likely remain cautiously optimistic at this stage.

Change is definitely manifesting in the macroeconomic and global geopolitical climates, however, as 2024 is a landmark year for elections. At least 64 countries, along with the European Union, are poised to conduct (or have conducted) national elections this year. These elections encompass nearly half of the world’s population.

Several pivotal elections have already unfolded in major Asian economies, including Indonesia, South Korea and India. Meanwhile, the world’s largest economy, the U.S., is gearing up for its presidential election, slated for November 5. The outcomes of these elections are set to shape political landscapes and economic policies, with global implications that will be monitored with keen interest. Virtually every industry has the potential to see impacts.

As the journey through 2024 continues, the potential twists and turns of the oleochemicals market in Asia and beyond may not be predictable but our commitment at P&G Chemicals is as steadfast as the tracks of a roller coaster – reliable, tested and true. Just as a roller coaster is designed to safely navigate every dip and turn, our team is prepared to help guide our customers through market fluctuations with a continued focus on producing high-quality oleochemical solutions. These principles have been the safety harness that has secured our journey together, and they will remain our priorities as we continue the ride into the future.