Lead: Starting in August, raw material palm oil prices remained at high levels, increasing cost pressure on the stearic acid market and squeezing profitability. The market continued to operate in a loss-making range, with many stearic acid units cutting production and capacity utilization once falling to 41%.
High costs drive stearic acid to fluctuate at elevated levels
In August, palm oil prices rose and stayed relatively firm. The domestic first-grade stearic acid market price stood at 9,500 yuan/ton, up 100 yuan/ton from the previous period, while the profit loss reached 550 yuan/ton. The high price was difficult to pass down the chain, and elevated levels lacked transaction support, so the uptick lasted only briefly before market prices fell again. However, spot supply of raw materials was limited, which restrained the decline in feedstock prices and left little room for cost concessions. The maximum loss in the stearic acid market once reached 580 yuan/ton. High costs also capped the downside for stearic acid prices. As of August 14, stearic acid was still fluctuating within the 9,500–9,600 yuan/ton range, with average profit at -540 yuan/ton.
Insufficient profit lowers stearic acid capacity utilization
Operating at a loss, stearic acid units ran at low loads, and a few plants suspended production due to raw material issues. As a result, daily capacity utilization held at around 46% from late July to early August, then gradually fell to a low of 41%. During this period, spot supply in the market was not ample, but the gradual decline in new orders weakened the sense of tightness. As the idled plants progressively resumed production, operating rates recovered to around 46%. Constrained by high raw material prices and weak demand, the plants that had cut output currently have no intention to increase production.
Demand and cost pressures coexist
After stearic acid prices rose to high levels, trading sentiment weakened. With transactions at high prices being blocked, spot availability increased slightly. At present, raw material prices are firm, narrowing stearic acid's profit margins. While costs provide some support, high-priced transactions have also cooled. In the short term, prices may ease in stages. Overall, costs in the stearic acid market remain in a high range, and cost pressure is still relatively heavy.
In August, end-users remained in the consumption off-season. After building positions earlier, mainstream stearic acid plants had queues for shipments, and downstream users mostly had sufficient supply. Market participants were cautious about chasing higher prices, keeping transactions limited to small order volumes for essential needs. Demand-side support was somewhat insufficient.
At present, the stearic acid market is under the dual pressure of insufficient demand follow-through and high costs. However, inventories at mainstream plants remain at moderate-to-low levels, and cost changes currently have a stronger correlation with price movements. It is expected that stearic acid market prices will first maintain a high-level run, but after persistent weak buying, the extent of price corrections may be restrained by costs.
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