Global Lactic Acid Prices Surge in October Amidst Supply Shortages and Rising Demand

Lactic Acid prices climbed on the global market in October 2023. The reasons include low market inventories, rising crude oil costs, rising feedstock prices, and increased end-user demand. Lactic Acid is an organic acid found largely in maize starch, sugarcane, and other sugary substances. It is widely utilized in various sectors, including food, cosmetics, pharmaceuticals, and chemicals. Recently, there has been a notable surge in global demand for Lactic Acid across these sectors, leading to a subsequent price increase.

As to the latest data released by the National Bureau of Statistics (NBS) in China, the official Manufacturing Purchasing Managers' Index (PMI) saw an unexpected decline in October, from 50.2 in September to 49.5. The poor performance suggests that the slow momentum seen at the end of the third quarter persisted into early 4Q23. Despite the current negative economic momentum, China has seen a surprising increase in consumer expenditure over the national holidays; more customers were making inquiries, which increased the cost of Lactic Acid. The Chinese food and beverage sector has increased consumption due to increased domestic travel during the Golden Week vacation. This leads to a higher demand for Lactic Acid in October, resulting in a price hike.

In the United States, business activity picked up in October, as evidenced by an increase in new orders and sales amid signs of easing inflationary pressures, favorably affecting the Lactic Acid market. This increase in business output was the greatest since July, indicating that the US economy is surviving the rise in interest rates caused by the Federal Reserve's drive to combat inflation, which contributed to an increase in market demand in the United States, leading to a rise in Lactic Acid prices. Furthermore, impending holidays in the United States, such as Halloween and Thanksgiving, have raised demand for Lactic Acid in food businesses, pushing higher prices.

One of the principal feedstocks utilized in the production of Lactic Acid is raw sugar derived from sugar beets or sugarcane. The price of raw sugar experienced a notable upsurge due to the adverse effects of the El Nino weather phenomenon, resulting in a severe drought in India, a nation responsible for approximately 20% of the world's sugar production. Thailand and other important sugar-producing Asian countries are also facing drought due to El Nino, adding to supply issues. This resulted in a limited sugar supply, raising sugar costs and, as a result, increasing Lactic Acid prices in India and Thailand. The Indian government announced that the sugar export restriction order will be extended on October 18, 2023, to ensure enough supply in the domestic market.

Furthermore, crude oil prices have risen after oil-producing countries in the OPEC+ group, including Saudi Arabia, opted to extend their voluntary oil production cuts until the end of the year. This pattern persisted in October as a result of the ongoing war between Israel and Hamas, which has caused global oil prices to climb. This caused a considerable rise in business expenditures and output costs, raising Lactic Acid pricing.

According to ChemAnalyst, the price of Lactic Acid may rise further due to steady demand from end-users and restricted market inventory availability. However, prices may decline by the end of FY23 due to diminishing worldwide demand for Lactic Acid, putting the market on the lower side.