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.
Supplies have slowed due to weather conditions but remain reasonable, so general availability has not been impacted too much. The quality of raw material remains good and overall we are experiencing some stability with this product and no foreseeable changes ahead.
Supplies are generally slow and have been consistently slow for some time. As a result, prices have remained firm with the market generally accepting these new price levels. At times, quality lacks consistency so some caution needs to be applied when evaluating any seemingly inexpensive offers. At this stage, we do not anticipate any major changes over the next few months. Some shipments are leaving Indonesia not correctly classified as Dangerous Goods. This is giving some exporters a $6-8 /kilo price advantage.
Heavy and persistent rains have severely affected local prices and supplies. Export markets are somewhat secondary compared with domestic demand for this essential oil, so locally there is no interest in comparing Indonesia’s performance on the export market with prices from other origins, such as China. Instead there is much anguish that local prices are where they are and, more to the point, the available supplies are as low as they are. Local prices have increased around 30% since the start of the year and this is unlikely to change until the rain stops and a drier period has set in for some weeks.
Expect continued price increases until mid-year.
Hopefully you’ve been keeping on top of our reports since late last year when we envisaged the ‘perfect storm’ when it came to longer-term raw material supplies as the situation certainly developed this way. You can read about the global market conditions in this market report but in Indonesia the prolonged heavy rains during the first half of the year slowed down collections and over time depleted stocks. As we entered the second half of the year we had hoped for an earlier dry season but this did not happen. In fact, as late as the end of August, Sulawesi was still suffering from heavy rains with no end in sight. Hopefully there will be a short window of dryer conditions between now and the next rainy season set to start in November but already it will not be a long enough period to bring any real relief in supplies.
Locally prices are rising every week as processors scramble for stocks to meet their obligations. Many tell us they are already oversupplied and are reluctant to offer any new quotations for Q4 business.
As a result, we expect supplies to remain difficult and prices to continue to rise for the foreseeable future.
Read more about the clove markets here
Prices increased around 25% earlier this year as market supply and demand seemed to rebalance after an increase in demand during 2016.
In recent months, prices have remained steady as most feel comfortable with today’s price levels and no real change in expected any time soon.
Mace supplies have been steady despite the ups and downs of nutmeg supply. No real change is expected in the foreseeable future.
Product continues to be available although quality issues remain a concern for some. There is no over supply in the market as many believe, just material more easily accessible locally allowing more people to trade the product. We don’t expect any major changes soon.
Markets have settled in recent weeks as supply and demand seem well balanced. Generally, all those involved in the product feel prices around today’s level represent a fair return for all, but unfortunately the market is more delicately balanced than it seems on the surface.
With little oil stocks in the supply chain, it is still difficult to secure large volumes or get commitment from processors for any date too far into the future. Collections have remained low all year not helped by the wet conditions and only a short-term drop in market demand has kept prices stable in recent weeks. It is feared that when demand returns this extra pressure on the supply chain could start the process of prices increasing once again, so our advice would be to cover your next 6 month requirements at these manageable levels.
The market has remained weak for some time now with most realistic buyers and producers realising prices are at rock bottom. There is hardly another dollar to be squeezed out of the supply chain with all involved already trimming margins to fight for new business. It is no doubt a buyers market at the moment and with supplies looking still in abundance there is little sign that this will change in the near future.
Whilst pleasing for some (end-users in particular) this situation does not encourage a sustainable future for supplies, as many farmers are likely to get discouraged over time to continue to produce with lower and lower returns. When this happens it could start to change the supply and demand balance and with it prices.
August and September are traditionally a good time to buy as supplies start to pick up at the beginning of the dry season. This year, with prices already at the bottom, we are not seeing the same benefits but buyers should be confident to keep healthy inventories at these price levels as the product only gets better with age and prices are unlikely to reduce further.
The general market aside there are a number of encouraging sustainability projects in place across Sulawesi, which aim to bring stability to particular areas of the market with an emphasis on supporting local communities. A number of multinationals and brand owners have endorsed this and Van Aroma are also heavily involved. These projects show a real value to everyone involved, ensuring the future is secure. This sort of transparent relationship among brand owners (or end-users), the processors, the collectors, the farmers and the local communities brings confidence to everyone in what historically can be a volatile market.
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?
The qualities and quantities of supplies remain challenging with no real changes seen over the past 6 months or expected in the coming 6 months.
With little availability we are also seeing some producers over heating the oil during the distillation process to shorten the distillation time, but in doing so they are burning the oil. This then affects the colour and the odour, which have not been acceptable for many end-users.
Whilst the education process continues alongside longer-term investments the situation is likely to remain critical for some time.
Ultra International B.V.
