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China’s Oleochemical Market Brace For Higher Demand Amid Disruption In Supply Chain And COVID-19

COVID-19 containment in China resulted in panic buying among Chinese especially for personal care, detergent and sanitation products. Amidst a full lockdown or partial lockdown of oleochemical producing companies, the COVID-19 panic buying scenario created a strong demand for oleochemical manufacturers to produce feedstocks especially for sanitation and healthcare products which is in short supply in the country. Fueled by rising demand, ICIS reported that price of fatty alcohol rose between USD10/MT to USD16/MT for the period 30 March to 5 April. Glycerin price rose between USD30/MT to USD50/MT within the same period.

There are a multiplicity of factors affecting China’s oleochemical demand. This includes the Chinese consumer demand and global supply disruption.

It is expected that the oleochemical supply situation might start to recover in Mid-April if Malaysia’s Movement Control ends. China’s oleochemical importers did not face any backlog of discharging their cargoes, according to some oleochemicals importers from China. Probably, the Chinese government has given priority for the cargo clearance.

Given a high POGO spread, currently between USD240 – USD300 per MT, there are expectations among Malaysian industry players that China will be short of glycerin while it is recovering from COVID 19 lockdown. This is because it is a by-product of biodiesel production. At this high POGO spread, it is not feasible to produce biodiesel. Other types of oleochemicals demand will also rise as China’s COVID-19 situation recovers.

Based on the feedbacks from Malaysian oleochemical exporters, oleochemical products are exported to China either in liquid, flakes or bits. For liquid cargo, the product is normally transported by using iso-tanks or drums. If the oleochemical products is exported in the form of flakes or bits it is exported in 500 kg bulk bag or 25 kg small bag. Based on ICIS feedback, there is still shipping space totransport this type of cargo under the current COVID-19 environment.

Prepared By:   Lim Teck Chaii

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