For the Quarter Ending March 2024
North America
Throughout the entirety of the first quarter of 2024, Palm Kernel Oil prices reflected prevailing market trends in the APAC region. The overarching trend witnessed was a notable increase in prices, driven by several key factors including the limited arrival of the product, consistent rising demand, and trader disruption ahead of the Red Sea dispute.
A significant driver behind the price hikes was the marked shortage in inventories, prompting market players to adjust their pricing strategies to safeguard profit margins. Given the USA's substantial reliance on importing Palm Kernel Oil from the Malaysian market, fluctuations in Malaysian provinces exerted a profound influence on the overseas market of trading nations.
Furthermore, the escalated container freight rates emerged as a significant catalyst contributing to the price surge, notably impacting industries reliant on maritime transport. However, challenges such as supply chain disruptions persisted until mid-Q1, resulting in imbalanced logistic activity that impacted the overall demand side of the market. As a result, due to inadequate built-in inventories and delayed fresh supplies, prices soared in exporting regions. In response, market players in the US resorted to bulk orders to secure sufficient stocks, further exacerbating the price increase. As Q1 ended in March 2024, the easing of freight costs and the appreciation of the dollar against producing nations' currencies provided some relief to downstream trades and suppliers, enabling them to procure goods at lower costs.
Asia Pacific
Throughout Q1 2024, Palm Kernel Oil (PKO) prices in the APAC region were influenced by several factors, notably in China where significant price fluctuations occurred. Heightened downstream purchases and limited arrivals from major producing regions like Malaysia drove price increases. Increased local consumption and the depreciation of the Chinese Yuan against the US Dollar further fuelled this trend. Festive celebrations briefly disrupted trade momentum, exacerbating supply-demand imbalances, and leading to a temporary pause in production activities and trading. This operational hiatus exacerbated supply-demand imbalances, prompting increased stockpiling of products ahead of the Lunar New Year festivities. Moreover, In Malaysia, heightened demand from downstream sectors, particularly oleochemical industries, drove price hikes due to reduced production in east Malaysian states which considerably affected the trade momentum as supplies continued to remain low concerning the export market’s inquries . Adverse weather conditions also constrained output, leading to decreased output and supply constraints throughout the quarter. The onset of Ramadan in mid-March increased demand for food staples, tightening supply and potentially pushing up prices for other oils, including PKO. Responding to increased buying interest, overseas buyers consistently restocked their shelves with higher inventories, facilitated by the devaluation of the Malaysian ringgit against the US dollar, making the product more affordable for end-users in dollar terms.
Europe
In Q1 2024, Palm Kernel Oil (PKO) pricing in the Europe region saw a modest increase, influenced by various factors beyond the usual top three. The primary drive was a sustained surge in domestic demand coupled with limited inventories among the suppliers, contributing significantly to the upward price trend. Furthermore, these insufficient inventories were exacerbated by a temporary trade slowdown ahead of weakened production witnessed among the exporting nations owing to less availability of palm kernel and fruits, restricting product availability to the importing nations including Europe. Further, import momentum faced continued disruptions, impacting PKO availability across the region. The situation in the Red Sea added complexity, affecting deliveries to Europe, African countries, and the USA. Shipping companies like Maersk rerouted ships to avoid potential attacks by Houthi rebels, leading to increased freight rates from production hubs like Indonesia/Malaysia to import destinations such as Hamburg or Rotterdam. This rerouting strategy led to higher prices in importing regions until late February. Additionally, as PKO is linked to palm oil production, disruptions in palm oil supplies due to production issues resulted in declining PKO stocks. This, coupled with sustained spot market demand, led to depleted supplies and upward pressure on prices, notably in the Netherlands as merchants persistently encountered substantial hurdles amidst prevailing market conditions with flagging suppliers. Furthermore, easing freight rates has exerted some resilience, which was countered by currency devaluation, providing higher cost support to the Palm Kernel oil market. As the depreciation of the Euro against the dollar occurred, merchants considerably traded their limited inventories of Palm Kernel oil at relatively higher costs, surpassing the highs from a month before.
For the Quarter Ending December 2023
North America:
Throughout Q4 2023, Palm Kernel Oil prices in the APAC region exhibited a nuanced pricing trajectory, characterized by a significant decline in October, followed by a November upswing and a moderate drop in December.
In October, the notable decrease in Palm Kernel Oil prices was driven by a surplus in the domestic market. Concurrently, the domestic acid market displayed moderate trading activity with a stable supply side, emphasizing order-centric sales and market transactions. However, November witnessed a contradictory trend as Palm Kernel Oil prices experienced a positive upswing.
This was fueled by a sudden rise in downstream purchasing activity domestically and an optimistic market outlook. Additionally, heightened costs of essential input materials, such as energy and raw materials, contributed to the favorable market conditions for Palm Kernel Oil during November. Global logistical challenges, including port congestion and container shortages, posed impediments to the seamless transportation of Palm Kernel Oil from production hubs to downstream markets. These disruptions escalated transportation costs and prolonged delivery lead times, further contributing to the surge in prices. As December concludes, prices once again underwent a substantial drop, signaling subdued market demand. This diminished purchasing activity prompted market participants to proactively adopt a strategy of selling products at discounted rates, aiming to deplete stockpiles before the year-end.
Asia Pacific:
In the APAC region, the Palm Kernel Oil market witnessed significant dynamics during Q4 2023, particularly in Malaysia, a major exporter and producer. Initially in October, Palm Kernel Oil prices declined, accompanied by a surplus inventory accumulation. Industry forecasts indicated a rise in production compared to the preceding month's exports. Market participants, including retailers, suppliers, and traders, maintained ample Palm Kernel Oil inventory to fulfill inquiries from both regional and overseas markets. Moving forward in November 2023, Palm Kernel Oil prices markedly increased in the Malaysian market, influenced by factors such as heightened consumption in the food industry, sustained high crude oil prices due to geopolitical risks, and fluctuating pricing dynamics of other edible oils. Additionally, demand in India experienced a moderate rise, driven by increased demand in both domestic and regional markets, especially in the biodiesel industry. Conversely, as December unfolded, Palm Kernel Oil values, while stable, decreased in the Malaysian market. This decline was attributed to slowing exports, primarily due to reduced offtakes from key importing nations, notably India, exerting downward pressure on prices. The global demand for vegetable oils typically experiences a dip in certain consuming countries, particularly within the APAC region.
Europe:
With respect to the entire Q4 2023, Palm Kernel Oil (PKO) prices in the European market exhibited a correlation with global trends, particularly in North America. In the initial phase of October 2023, PKO prices witnessed a significant downturn, perplexing stakeholders in dependent industries. The primary catalyst for this decline was the ample supply of Palm Kernel Oil in the domestic market. Furthermore, sectors such as food and personal care, key consumers of PKO, increasingly adopted just-in-time purchasing strategies, contributing to an overall depreciation in prices. Transitioning into November, there was a subsequent upswing in PKO inquiries, driven by a moderate improvement in consumer sentiments within the domestic market. This surge was attributed to heightened demand during the holiday season, prompting food manufacturers to pre-stock in anticipation of festive demand. Concurrently, businesses displayed a moderate focus on prioritizing inventory restocking activities, bolstering market resilience. Downstream panel factories aligned their procurement strategies with incoming inquiries, fostering heightened bidding and offers among enterprises, thereby exerting an influence on market dynamics. However, as December 2023 unfolded, a conspicuous downturn in prices captured the attention of industry players and analysts, signifying a weakened trend that deviated from earlier projections. This shift in pricing dynamics carries implications for both market experts and traders who strategically amassed stocks in anticipation of an envisaged surge in demand from their respective end-user sectors. Concerning the supply side, Palm Kernel Oil remained readily available, with downstream product procurement primarily contingent on incoming inquiries from the regional market. In the short term, trade activity encountered additional setbacks due to lackluster demand within the regional market.
For the Quarter Ending September 2023
North America
In the North American region, Palm Kernel Oil (PKO) prices displayed a volatile market trend. Initially, at the beginning of the third quarter of 2023, prices rose despite moderate import activities and limited supplies from major exporters such as Malaysia, a significant player in Palm Kernel Oil production. This disruption influenced the overall market trend until April 2023. As the third quarter progressed, prices globally witnessed a significant decline due to sluggish regional trade activities and increased inventories in warehouses. Within the domestic market, demand continuously decreased. However, despite the Midwest's heatwave and drought potentially affecting Mississippi River levels crucial for US Palm Kernal Oil exports, the USDA maintained its import projection of about 25 million bushels. Similarly, exports remained unchanged for the month. Additionally, the FAO Vegetable Oil Price Index averaged 120.9 points in September, marking a 5.0-point (3.9 percent) decrease from August. This decline was driven by lower world prices across palm, soy, and rapeseed oils. International palm oil prices continued to decrease, primarily due to heightened production in major Southeast Asian countries and weakened consumption.
Asia Pacific
In the APAC region, Palm Kernel Oil (PKO) prices initially rose optimistically in July but experienced an overall declining trend. The surge in prices during the first half of Q3 was attributed to the global economic recovery and increased demand for palm kernel oil in the food, cosmetics, and biofuel industries, leading to a continuous rise in demand for the product for two consecutive months. Malaysia's ongoing production facilities ensured a steady supply of palm kernel oil, resulting in relatively stable higher-end prices. However, adverse weather conditions in Malaysia led to a decrease in the yield of Palm Kernel from the fruit kernel. Additionally, the strengthening of the Malaysian ringgit against the US dollar contributed to increased export prices, making goods more expensive. The manufacturing PMI for Malaysia showed a marginal increase in July 2023, climbing from its five-month low of 47.7 to 47.8. Favorable weather conditions and the expansion of palm oil plantations contributed to an increase in the supply of palm kernel oil in Malaysia in recent months, leading to a decline in prices in August 2023. Despite ongoing investments and government spending, challenges emerged due to the global economic slowdown, affecting Malaysia's economy. As of September 2023, trading remained subdued, influenced by weakened consumer sentiments. Furthermore, the depreciation of the Malaysian ringgit against the US dollar for the second consecutive month in September 2023 enhanced the competitiveness of Malaysian exports, including Palm Kernel Oil, in the global market. The Malaysia Manufacturing PMI declined from 47.8 in August 2023 to 46.8 in September 2023, marking the lowest reading since January. This marked the 13th consecutive month of decline in the manufacturing sector, with new export orders decreasing at the third-strongest pace in history. Output and new orders both slowed down, and employment fell for the fifth consecutive month. Additionally, consumer spending experienced its most significant slowdown.
Europe
Palm Kernel Oil (PKO) prices in the European market during Q3 2023 mirrored those in the Asia Pacific region. July saw the palm kernel oil (PKO) market remaining optimistic. One of the factors impacting Palm Kernel oil prices was the consistent rise in demand combined with low stocks. Furthermore, the market remained elevated due to increased production of raw materials like palm fruit kernel required for palm kernel oil, observed in recent months. Unfavorable weather conditions in Indonesia and Malaysia, the world's major palm kernel oil producers and exporters to the Netherlands, played a role. Droughts and floods in these countries damaged the crops used for palm kernel oil production, leading to reduced supply in the European market. The surge in demand for palm kernel oil in various sectors such as food, cosmetics, and biofuels helped sustain the upward price trend in July 2023, as palm kernel oil is a key ingredient in these products. In July, producer confidence declined, falling below the long-term average. However, increased inquiries for Palm Kernel Oil from downstream industries and neighboring nations, including food, cosmetics, and biodiesel sectors, balanced the supply-demand equation for merchants, helping them maintain their profit margins. As August progressed and into September, prices significantly dropped, reflecting weakened Palm Kernel oil prices, a pessimistic market outlook, and concerns about environmental issues in major exporting nations like Indonesia and Malaysia, the world's top producers. These factors contributed to a substantial decrease in the prices of specific vegetable oils, including palm kernel oil. Furthermore, throughout September 2023, the consumption of palm kernel oil in the regional market remained impacted, leading to reduced usage in cosmetics and personal care sectors.
For the Quarter Ending June 2023
North America
Throughout the North American region, the prices of Palm Kernal Oil (PKO) witnessed a mixed market trajectory as the prices continued to rise at the beginning of the second quarter. The importing activity was moderate, while the supplies from exporting nations, primarily Malaysia, one of the largest exporters of Palm Kernal Oil, were weak, which disturbed the overall market trend until April 2023. Moreover, moving towards the middle of the q2, the prices fell considerably across the globe with weak regional trade activity and higher stocks at the warehouses. In addition, numerous economists and business professionals reported that the US inflation rate was declining. Despite falling energy prices, there was still significant underlying inflation that exceeded the Federal Reserve's target rate. Due to their high inventory levels, domestic producers were able to meet local demand despite the challenges. However, the food inflation rate in the US increased to 10.1% in May 2023 from 8.6% in April. Following the declining trend when Q2 concludes, the prices of Palm Kernal Oil stabilized across the United States with a moderate surge in demand from the domestic market balanced by the overall supplies presented by the merchants.
Asia Pacific
Across the APAC region, Palm Kernal Oil (PKO) prices showcased a varied price trajectory in Malaysia, one of the significant exporters of PKO. During the first half of Q2 2023, there were erratic trends in the price of palm kernel oil in Asia. Prices mostly changed near the top of the curve. During the quarter shift, some reverse fluctuations were seen, but those were primarily due to increased consumption during the holy month of Ramadan, which led to increased demand and constrained supply. Moving forward, prices of PKO steadily dropped in the region around the middle of Q2, which was attributed to high outputs from Malaysia and other major producers of palm oil, as well as weak demand for the product from suppliers. Also, in May 2023, amid weaker demand, the Malaysia Manufacturing PMI fell to 47.8 from 48.8 in April, marking the 9th consecutive month of decline and the biggest drop since January 2023. For the ninth consecutive month, new orders decreased; the most recent decline was the steepest in three months due to reports of demand restraint on both the domestic and global markets. For the fifth month in a row, suppliers' delivery times were shortened, and purchasing activity fell to its lowest level in nearly two years. While as Q2 ends, The National Palm Kernel Oil Board reports that palm kernel oil inventories increased at a slower-than-anticipated rate as production fell and exports rose. Additionally, the Manufacturing Purchasing Managers (PMI) reported a YoY of 47.7 in June, which was slightly less than the YoY of 47.8 in May. The domestic retailers had an adequate supply of inventory to meet the region's overall demand.
Europe
Palm Kernal Oil (PKO) prices in the European market during Q2 2023 mirrored those in Asia Pacific. Prices for palm kernel oil increased across the board at the beginning of Q2. Prior to Ramadan, the main cause of the supply disruption came from exporting countries, particularly Malaysia, which was one of the major exporters of PKO to the Netherlands. This had an effect on the availability of all cooking oils in the nation, including palm kernel oil. The weaker market fundamentals, on the other hand, caused prices to decline significantly after April and end Q2 on a negative note with frequent fluctuations. Market demand declined for this month as a result of consumers' cautious wait-and-see attitude and the high-cost inflation brought on by the conflict between Russia and Ukraine. Additionally, as June drew near, prices stayed steady, maintaining a balance between the region's overall supply and demand dynamics. Due to higher stockpiles among the merchants successfully balancing the overall demand, traders did not place many quotations throughout June.
