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January 23, 2025Global Fatty Acids Market Snapshot
Fatty acids are basic oleochemicals used in a variety of products including including soap, detergents, cosmetics and personal care, food applications, agrochemicals, metal working, candlemaking, paints and textiles. Oleochemicals are substances derived from natural fats and oils, either from animal or vegetable sources. Basic oleochemicals are now commoditized and currently most growth in the oleochemicals market is happening in Asia, particularly in China, India, Indonesia, and Malaysia, due to strong demand growth and/or the availability of raw materials. Sustainability awareness and policies have contributed to the growth of oleochemicals as consumer preference shifts towards natural and sustainable products.
The production methods for fatty acids and glycerine have remained largely unchanged over the past few decades and is based on hydrolyzing oils and fats into fatty acids and glycerine. Intermediates derived from fatty acids include fatty alcohols, fatty amines, and fatty acid esters (including methyl esters, partial glycerides, was esters, and ester oils).
Most new fatty acid investments are located in Malaysia and Indonesia, where feedstock is readily available and investors are typically vertically integrated with the feedstock supply. Depending on the fatty acid product that is required, the main feedstocks used for fatty acid production includes the following, and are typically high in C12 to C18 fatty acids (lauric, myristic, palmitic and oleic acid):
- Refined Palm Oil (RPO)
- Palm Kernel Oil (PKO)
- Palm Stearine (PST)
- Coconut Oil (CNO)
- Bleachable Fancy Tallow (BFT)
- Soy Bean Oil (SBO)
Fatty Acids
Fatty acids have a wide range of applications, either in their base form or as derivatives, with uses depending on chain length. These include products such as cosmetics, personal care items, rubber, food processing, pharmaceuticals, and more. Fatty acids are used directly in textiles and lubricants or processed into derivatives like emulsifiers for food processing and elastomers for producing nitrile rubber. The oldest application of fatty acids is in candle production through stearin (saturated C16-C18 fatty acids). Intermediates of fatty acids include fatty alcohols, fatty amines, and fatty acid esters such as methyl esters, partial glycerides, wax esters, and ester oils.
Global demand for fatty acids is around 13 million tons, with key end uses - detergents and soaps, personal care and cosmetics, and food processing – accounting for around three quarters of this annually.
China is the largest consumer of fatty acids accounting for over a third of global demand in 2024, with the rest of the Asia Pacific region accounting for nearly thirty percent. China has experienced the highest growth as several palm plantation owners have built oleochemical facilities in the country to satisfy growing demand for personal care products. The majority of China's fatty acid feedstock is palm oil imported mainly from Indonesia and Malaysia. Palm oil is favoured due to its cost, high yield, and fatty acid composition. While soybean oil is primarily used for edible purposes in China, a portion is diverted for industrial use, including fatty acid production. This is primarily sourced from Brazil, the United States, and Argentina
Besides China, global growth in fatty acid demand is driven mainly by countries in South-East Asia such as Indonesia and Thailand. Demand has grown strongly in recent years reflecting these countries diversifying into intermediates downstream from fatty acids, in addition to growing populations and burgeoning middle class driving consumption into the detergent, cosmetic and personal care and food sectors. India is another country expected to see strong demand growth, underpinned by developments in the pharmaceutical and plastic sectors.
Asia Pacific has the largest fatty acid production capacity globally, accounting for over sixty percent of global fatty acid production, with prices closely following palm oil prices. Capacity is concentrated in countries which are large producers of natural oil feedstocks: Indonesia, Malaysia and India. Fatty acid supply is highly fragmented, constituting intense competition. Large producers include KLK, Zanyu Technology Group, Wilmar, IOI Olecohemical Industries Berhad, ICOF and VVF.
Asia Pacific is expected to be the focus for capacity development over the forecast period, with both Indonesia and Malaysia implementing policies to increase the downstream processing of palm oil. In December 2024, Indonesia announced an increase export duty on crude palm oil (CPO) to 10 percent from the current 7.5 percent to finance higher subsidies for biodiesel. Indonesia collects taxes to subsidize its mandatory biodiesel program, which will increase the biofuel’s content from the current 35 percent to 40
percent (B40). Implementation of the mandate was scheduled for January 2025 but has been delayed until February.
Furthermore, the Indonesian government has announced that by 2026, the biodiesel blend will increase to B50, with plans to completely halt diesel imports. Similarly, Malaysia raised export duties on CPO in November 2024, with the increase designed to promote local downstream refining operations, according to Plantations and Commodities Minister Johari Abdul Ghani. Indonesian palm oil is increasingly used within Indonesia. Domestic use of palm oil for either local consumption or downstream manufacturing increased from 32 percent of production in 2018 to 44 percent in 2022. Data from the Indonesian Palm Oil Association (GAKPI) shows that in 2022, over half of the domestically consumed palm oil was used for the biodiesel and oleochemical industry with the remainder used in food products.
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Market Insights: Oleochemicals - 2025
This report provides a comprehensive review of the oleochemicals market, specifically covering fatty acids, glycerine and fatty alcohols. Analysis includes a discussion regarding key market trends, drivers and geopolitical factors influencing supply and demand in each region. Supply, demand and trade analyses are presented for North America, South America, Western Europe, Central Europe, Eastern Europe, Middle East, Africa, Asia Pacific excluding China and China. Also includes a comprehensive discussion of the competitive landscape and speculative projects in the regions stated (for fatty acids and fatty alcohols).
The report includes pricing analyses for oleochemical feedstocks (palm / palm kernel oil (Asia), rapeseed oil (Western Europe) and soybean oil (United States)); C16 to C18 fatty acids (cost plus margin basis); technical grade glycerine; and C12 to C14 natural fatty alcohols (cost plus margin basis) in Western Europe, China, United States.
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