Market Report April 2012:
Overview
There appears to be a number of reports indicating that the long awaited recovery in the USA is finally beginning to happen. Unfortunately in Europe, the governmental debt problem is struggling to be contained and the EU economies seem a long way from joining the USA on the road to recovery, but it does seem that the doom and gloom is beginning to lift and business seems to remain steady.
Stock levels remain at a low level and we have recently seen that interruption in supply has caused price spikes for a few items such as Menthol and Vanillin. We would advise buyers to ensure that they have contracts in place to cover their demand through to August. By June there should be sufficient information to asses the essential oil crops and then decide when further purchasing is required.
The crude oil price remains in excess of USD100/barrel and whilst it remains at this level, we can only see prices of downstream building blocks remaining firm.
Essential Oils
The price correction that took place during the first quarter has certainly encouraged buyers back in to the market and during recent weeks it appears that prices have stabilized, trading in a very narrow range. There are reports coming from China of drought conditions in the Yunnan province and this could create issues for products such as Citronella oil, Eucalyptus oil and Geranium oil. Furthermore, the recent Tsunami scare in the India Ocean is a reminder of the delicate balance that nature holds on the supply of natural products.
Aroma Chemicals
Prices have remained firm due to the Crude oil prices remaining over USD100/barrel for the past few months and no apparent relief of this situation is on the horizon.
Gum Turpentine prices have remained stable and are expected to remain so until there is clearer news from the new crop in May/June. Prices on Phenol based Aroma Chemicals seem to be a little weaker.
Aniseed/Anethol– Chinese
Aniseed Oil – The quality of Aniseed fruits have not been up to sufficient standard to sell in the fruit markets and more material is being made available for oil processing which has helped to reduce prices by around 10%.
Anethol– Prices have also eased by around 10% reflecting the reduction in the Aniseed price.
Cardamom Oil
Guatemala – During the past few weeks we have seen prices increase due to strong demand and limited availability at origin.
India – Prices are increasing due to strong demand and limited supply. Part of the price increase may also be due to speculation by traders on the MCX in India.
Cinnamon Leaf Oil
Prices have slowly continued to decline and we are seeing an increase in demand from customers who feel that the price level is suitably attractive for them.
Citronella oil 85/35% min. Chinese
Growers are no longer willing to sell at what they regard as low prices and recently we have seen a reverse in the price decline.
While demand remains quiet sellers at origin may struggle to maintain their recent price hikes, but availability of good quality oil does seem limited and if demand improves prices could move up very quickly, along with the added worry of a drought in the area. Definitely one to watch.
Cloves and Derivatives
The news from Indonesia and Madagascar is that the total production of Clove Leaf oil of 5000-5500mt is sufficient to meet annual world demand, but demand remains flat and so do prices.
Most buyers are hoping for prices to decline and prefer to wait and see what happens over the next month or so before the 'Wet Season' begins.
Di Ethyl Phthalate (DEP)
The price increase that came in to effect during the early part of the year, due to the increase of phthalicanhydride, has remained and with crude oil prices remaining firm and demand steady it seems that prices will remain at present levels for the next month or so.
Eucalyptus Oil
In spite of the reported drought in the main growing area of Yunnan, supply remains good and able to meet current demand. Prices have remained fairly stable over the past 3-4 months.
Eucalyptus Citriodora
Brazil – Supply continues to be good and meeting demand. Prices have weakened slightly during the past few months but are still considerably higher than the more attractive prices of a few years ago.
China – Prices remain much higher than those from Brazil. Availability remains limited.
Geranium Oil
Egyptian – The bumper crop of 2011 which produced double the average crop still hangs over the market and with only sporadic demand, price remains under pressure. New crop in June is predicted to be good, some reports we are receiving indicate that the crop will again be much larger than the average and unless there is a prolonged and strong demand we do expect prices to soften. We understand that growers and exporters are suffering some big losses and we have heard recently rumours of oil being adulterated.
Chinese – Supply of good quality oil remains limited and prices have remained surprisingly stable, trading some USD50-60/kg higher than Egyptian oil. New crop material should be available during July/August.
Guaiacwood Oil – Paraguay
Price has now stabilized at the higher levels and whilst supply remains limited, prices should remain firm. Demand has been steady.
LitseaCubeba– Chinese
During the past 6-8 weeks prices have softened by about 10%, as demand has remained very weak.
Menthol/Peppermint oil – Indian/Chinese
The price for Menthol oil has remained very firm, spurred on by continued speculation on the MCX in India and strong demand from Europe and the USA. With prices increasing so dramatically over a short period a number of producers in India and China have faced serious contractual problems and we do know of a number of defaults, which has added woe on to an already dire supply situation.
Availability of spot material both in India and China remains tight, whilst stocks in Europe and USA are also at very low levels. A number of key producers are predicting that prices during April and first half May will increase again and that we will have to wait until July or August to see prices start to return to lower levels.
Orange oil/Terpenes
The well predicted and expected price reduction has continued and levels are looking very attractive when compared to prices of just a few months ago. Supply is good, but demand has also been strong as buyers look to take advantage of the lower prices. Brazilian new crop is expected to be available slightly later this year, around July/August and we will be reporting about the expected crop as soon as information is available. Prices are driven more by the Floridian market, Brazil are in a situation to reduce prices to compete with Florida
Patchouli oil – Indonesian
Demand remains flat and exporters have been lowering prices in an attempt to attract buyers.
We have no reports of problems with supply and prices remain soft. In addition to the usual Java/Sumatra crude oil we now have a new growing area Sulawesi which have produced large volumes this year.
Petitgrain Oil
Demand/supply remains balanced and prices remain stable at the new higher levels.
Spearmint Oil – Chinese
Prices remain firm and likely to remain unchanged until new crop in July/August.
Poor weather conditions at origin have seemed not to have had any effect on price and with demand in Europe remaining flat we see no reason why prices will change. Growers confirm that the current prices that they are achieving are just about the workable minimum for them, but on the other side customers are not willing or able to pay higher prices.