Supplies of good quality raw material remain constant leading to increased popularity in the market place. Volumes are on the increase and new control measures are in place to ensure that this growth can continue with a fair degree of supply certainty.
Despite raw material availability slowing in recent months the overall impact on the market has been negligible so we can therefore expect to maintain this good period of stability we’ve been enjoying.
Although supplies remain slow there has been no further strengthening in prices for some time so we can say the markets are firm but steady. It is hard to see any major changes in the coming months. As mentioned before with this product, it is worth keeping a watchful eye on quality as some exporters are offering a slightly cheaper grade consignment and also not declaring the goods as Dangerous Goods.
The increased price trend seen during March and April has slowed and stabilised with no immediate signs of receding. That said, we expect that once we are well into the dry season, supplies will improve and with it there should be some welcome price relief. Expect another couple of months of firm pricing before better times are upon us.
Clove prices have peaked in what has been a long, wet period across Indonesia, which has slowed down supplies to some of the lowest levels seen in recent years. This has led to a tightening in supplies putting pressure on prices for the past several months. While this isn’t set to change dramatically in the immediate weeks it is anticipated that supplies will improve once the dry season is upon us and with it we expect some easing in prices. This is more likely to be late June, early July before the market feels any real benefit but we are increasingly confident that better times are ahead.
The situation remains the same as it has throughout the course of 2017. Supplies are not as abundant as they were last year but it is also hard to pinpoint the specifics that have led to this. It is expected that over the course of the year output will be around 20% less than in 2016, which is the same increase we have seen in prices since the start of the year. For now we do not expect to see any significant changes to this scenario.
There is certainly a knock on effect from the current situation impacting the supply and pricing of nutmeg oil but it is less damaging for mace as the market is smaller and can withstand some short-term disruptions in supply.
Our general advice continues to be that although supplies have consistency improved since the second half of 2016, some qualities are less than desirable and some caution needs to be observed.
Overall the dynamics of the markets haven’t really changed despite many believing more producers have entered the market but this simply isn’t true. Material is moving around the local market and traded more freely but total volumes are likely to remain unchanged
There is a subtle pattern developing here in which the month on month supply situation becomes a little bit more difficult than it was the month before. There are lots of reasons why this happening, which all stem from last year’s sudden price drop and the abandoning of many plantations. But today we are seeing that overall demand is slightly higher than supply meaning that month on month the conditions get that little bit worse.
The effect on prices has been the same with a $1-2 /kilo increase each month which over time has started to accumulate. There have been some further, more notable increases in raw material costs these past couple of weeks as many larger processors have entered the market in order to secure stocks against long-term contracts of many end users. This could see prices jump again in the coming few weeks.
It’s been a buyers market in recent months as overall demand patterns have been lower than usual, but this is not unusual when we look back in history. It is not uncommon to see this sort of demand curve and we do not believe that global consumption is down more than a few per cent.
Today’s export prices for oil do not directly reflect the prices for collecting raw material. We’ve seen export prices fall over the past couple of months yet raw material costs have remained relatively stable. This mean processors and traders are cutting into their margins to compete for business, which in the longer-term is not a healthy position for the supply chain.
Whilst the wet season has worked well for patchouli, the dry season ahead will not be so kind as many standing plants, not harvested today because of the low price expectations, will dry and be damaged. At this time, we expect farmers to insist on higher prices to compensate for yield losses and given today’s lower processors margins, any price increase will have to be passed onto the end-users. As there is a lack of raw materials and oil in the supply chain we expect any changes to be quite sudden once they happen, which could be August or September.
Those with knowledge of the history of this product will realise that these market conditions don’t last forever, so it is worth keeping healthy stocks at these low price levels, which will surely be a good investment when times aren’t quite as positive.
All the signs suggest the market has reached the bottom making it an attractive time to buy.
Over the years the process of obtaining patchouli oil has gone further than simple steam distillation. The quality of raw material, particularly from Sulawesi, has meant that to obtain the quality the industry expects then a further process of fractionation is required. From this process we obtain the product patchouli terpenes and with it, a fully natural, versatile by-product, which in today’s market offers some interesting applications.
In a market where cheaper naturals seem to becoming more and more scarce our patchouli terpenes offer clients an opportunity to formulate with a cost effective ingredient.
With prices cheaper than today’s citrus terpenes can you afford not to be looking at introducing this new ingredient?
There has been no notable improvement in supplies or pricing meaning that quality issues are still troubling and market prices remain high.
The molecular distilled quality is becoming more popular in order to eradicate the burnt odour issues but this isn’t always a solution for some.
For now, we expect conditions to remain the same for the foreseeable future. Supplies, samples, quality and shipments will all need to be managed carefully and it is recommended that any interested buyers contact their suppliers well in advance to ensure they have material when they need it.
Ultra International B.V.
