Asia’s Oleochemicals Sector Weathering Volatility, Seasonal Impacts
By: Azean Mohammad, Director, Eurasia Market Strategy & Planning
Oleochemical industry price trends in Asia have been mixed across products due to flux in feedstock markets and cost factors, along with varied supply and demand. Buyers and sellers of oleochemicals continue to operate in a dynamic environment with volatility in costs and currencies, compounded by geopolitical factors and new policies impacting consumer confidence. However, hope is on the horizon.
We’ve seen a significant ramp-up in industry activity over the past year, with many businesses reopening and manufacturing and travel in Asia largely resuming by the end of 2022, although China’s borders remained all but shut. We welcomed 2023 with the long-awaited news of China lifting its restrictions, and the world is now watching the pace and extent of the country’s recovery.
Given China’s setting, in March, of a modest economic growth target of “around 5%” for 2023, there is cautious optimism that oleochemicals demand and factory outputs will rise by mid-year. On the heels of China’s announcement, decision makers and thought leaders in the edible oils industry gathered for a palm and lauric oils price outlook conference in Malaysia, after a hiatus of a few years, to rebuild connections and evaluate market trends.
In the palm sector, recent torrential rains and flooding have disrupted harvesting activities and impacted transportation logistics. We’ve seen a surge in domestic spending on food and essential items to support the people affected by the extreme weather events.
In the near term, uncertainty remains over Indonesia’s palm oil exports, prices and policies to manage domestic prices ahead of the Eid holidays. We should expect the usual seasonal impacts of increased Eid demand and reduced harvesting due to the month of fasting. Barring any major typhoon disruptions or damage, we can also expect steady production of coconut oil, given rainfall levels of 2022.
Logistics challenges, which were pronounced in Asia during the height of the COVID pandemic, have tapered down. However, sporadic challenges do crop up.
Despite the volatile backdrop, P&G Chemicals’ long-term values of producing quality oleochemical products safely, meeting supply commitments and creating long-term joint value with our customers will remain unchanged. We will continue to deliver excellence as we have done in Asia for nearly 30 years and globally for more than 180 years.