The US Tall Oil market continued to slide throughout November with no sign of letting up, due to a steady downtrend driven by a mix of weak buying enthusiasm, an abundance of supply on hand and pretty much zero interest from export markets. Despite many kraft-pulp mills chugging along at full capacity and feedstocks coming in consistent, buyers just weren't willing to take the bait - they figured that the softness would just keep going right on into December. Meanwhile, US exporters saw arbitrage opportunities dwindling and some much-improved supply coming out of Scandinavia, which left them with precious few chances to earn a premium. All of this combined to just keep pushing US inventories higher. Throughout November, demand from resin , coating , adhesive & chemical makers was pretty routine but just didn't have the sense of urgency that would've allowed them to absorb all the product being churned out - meanwhile , the folks making renewable diesel that had previously been a main driver of demand for Tall Oil, started to scale back their purchases as the credit markets stabilized - which meant they weren't having quite the same impact on pricing. With logistics humming along just fine & no price pressure coming from raw materials or energy inputs, suppliers really had no room to try to push prices up. As a result, Tall Oil prices kept sliding all the way into the end of the month - setting the stage for a soft start to December.
The US Tall Oil market took another step down in November, continuing the softer trajectory seen in October as low buying temptation and a whole lot of supply hanging around made for a distinctly bearish market for Tall Oil. Throughout the month, Tall Oil suppliers based in key producing regions informed that buyers were sticking with short-term, just-what-they-need type purchases as they tried to navigate a market where supply was outpacing demand with ease. This trend also matched up with broader seasonal patterns as, as usual, a year-end slowdown in certain industrial areas ended up suppressing demand and keeping the pressure on sellers to send out more product.
October already had the market looking soft when Tall Oil values in the US started to slide, which just reinforced the idea that this sector was headed for a bit of a lull. As November went on, kraft-pulp mills kept up consistent operating rates which meant that there was plenty of feedstock available to draw on - which, left suppliers with no reason to try and hold onto higher prices for Tall Oil. Even with logistics performance in the Gulf and Southeast starting to pick up - allowing for a bit more fluidity in getting goods moving - this didn't translate into any real pricing power for Tall Oil sellers. This made more predictable delivery schedules keeping the market in a comfortable supplied state. US exports hit a speed bump as buyers in Northern Europe and parts of Canada became a bit less willing to pay those extra premium dollars, which in turn reduced the opportunities for arbitrage and made the US Tall Oil suppliers think twice about pushing exports.
In response to all of this, many domestic players started to see tank inventories start to grow, but it was enough to support a trend where Tall Oil continued to slide lower throughout the month.
On the supply side of things, mill activity in core southern US states kept up consistent runtime - which means production of Tall Oil and associated intermediates stayed steady. Since key input costs such as sulfuric acid and natural gas stayed steady there were no real upward pressures that could have helped to push up Tall Oil price resistance. The fact that there were no major maintenance outages at the key distillation units helped to keep Tall Oil output levels smooth. Export channels, while still working, weren’t as lively as they had been earlier in the year because overseas buyers were rebalancing their needs in response to renewed softwood production activity in Scandinavia. US demand centers – including the usual suspects like resin, ink, coating, and adhesives manufacturers - went about their routine fourth quarter restocking for Tall Oil, but without the kind of urgency they need to keep up with accumulated supply. Other market players noted that some other demand drivers for Tall Oil, including those renewable diesel refineries - had lost a bit of steam as credit markets settled down, which in turn ended up reducing one of the more aggressive off-take streams were seen earlier in the year.
US industrial buyers have been taking a cautious approach to purchasing this year, up until November at least. They've been stockpiling supplies, but only enough to cover what they need - not trying to second-guess the market by forward-buying too heavily. That cautious approach has helped the Tall Oil suppliers a bit, making it easier for them to negotiate lower prices without worrying about running out of stock. Meanwhile, both the home building industry and the energy sector have been quiet, so demand for Tall Oil has been steady, rather than super-high.
Market experts are now saying that Tall Oil prices will probably just keep on falling through December, because buying interest is still pretty low & holding steady at that low level. With there being plenty of supply around & production staying steady, the Tall Oil suppliers are still competitive. Meanwhile, the buyers are just taking what they need, rather than making long term plans. Some of the Tall Oil exporters have taken it easy, cutting back on their offers a bit just to make sure they can still get their goods shipped out before the year ends.
