Lang
Global oleochemical markets commenced 2026 grappling with soft and uneven demand, yet the initial seven months have brought about changes far exceeding a typical cyclical recovery. The landscape for fatty acids has been profoundly altered by recent U.S. trade actions, while fatty alcohols have experienced sharp fluctuations influenced by palm kernel oil (PKO) dynamics and heightened competition from synthetic alternatives. Glycerine, conversely, has continued to respond primarily to its established drivers: the levels of biodiesel production and demand for epichlorohydrin (ECH).
The ongoing conflict in Iran served to intensify these pre-existing market forces rather than generate new ones. From March onwards, escalating costs for crude oil, vegetable oils, and freight led to higher production and replacement costs across the industry. Furthermore, disruptions affecting shipping routes, particularly around the Strait of Hormuz, extended lead times for deliveries and prompted buyers to engage in precautionary stock-building. Although some immediate logistical bottlenecks eventually eased, freight rates remained persistently high across several key trade lanes, thereby continuing to influence delivered prices and procurement strategies.
A pivotal development for U.S. fatty acid markets began on January 28, when Vantage Specialty Chemicals initiated antidumping and countervailing duty petitions against specific imports originating from Indonesia and Malaysia. This filing immediately influenced sourcing decisions, even prior to the escalation of the Iran conflict and the sharp rise in feedstock and freight costs observed in March. Consequently, importers and buyers began re-evaluating their reliance on Southeast Asian suppliers, leading to a noticeable shift in some demand towards domestic U.S. producers.
This trade case also underscored a systemic challenge confronting U.S. production based on tallow. While Vantage attributed its decline in market share and profitability to unfairly traded imports, a segment of market participants contended that elevated tallow costs and insufficient investment in domestic production capacity were also significant contributors to weakened competitiveness. The expansion of biofuel production has intensified the competition for tallow and other waste fats, thereby supporting higher feedstock prices and escalating operational costs for fatty acid manufacturers. This policy impetus to support renewable fuels has, perhaps unintentionally, created a disadvantage for another domestic industry heavily reliant on the very same raw materials.
The Iran conflict subsequently accelerated these market shifts. Prices for tallow, palm oil, and palm kernel oil (PKO) surged dramatically, freight costs soared, and concerns regarding supply security spurred strategic safety-stock building across North America and Europe. Within the U.S., stearic and oleic acid markets tightened considerably, although palmitic acid remained comparatively abundant. In Europe, a period of panic buying and rapidly increasing replacement costs drove substantial price increases during the second quarter, before customers reverted to need-based purchasing after replenishing their inventories.
The most recent U.S. trade measures are now providing more enduring price support. Preliminary countervailing duties (CVDs) were implemented on July 23, imposing rates of 16.47–16.48% on Indonesian exporters and approximately 4.2–4.4% on Malaysian respondents. Importers are now required to place provisional cash deposits on all covered products. Determinations for preliminary antidumping (AD) duties have been postponed until September; if these findings are affirmative, they could result in additional cash deposits being levied on top of the existing CVD measures.
Furthermore, the application of Section 301 tariffs has become highly product-specific. Effective July 24, the additional 10% tariff continues to apply to imports from Indonesia and Malaysia, but lower-purity fatty acids falling under specific Chapter 3823 classifications, including stearic acid 50–70%, palmitic acid 80%, caprylic-capric acid, and oleic acid 72–80%, were granted an exemption. Conversely, many industrial mid-cut products categorized under HS 2915.90.10 are now subject to this tariff unless they are imported for pharmaceutical applications, and palmitic acid with 90% purity or greater is also explicitly subject to the additional duty.
Looking ahead to the second half of the year, U.S. stearic and oleic acid prices are anticipated to remain supported throughout Q3 and Q4. This is attributable to the elevated replacement costs resulting from CVD deposits, persistently high freight rates, and the limited capacity of domestic producers to augment supply. The postponed September AD determinations introduce further upside risk to prices. Concurrently, Southeast Asian volumes that are displaced from the U.S. market may be rerouted to China, Europe, or other Asian markets, potentially intensifying competitive pressures outside North America.
Fatty alcohols began the year under considerably different market conditions. Demand was subdued, inventories were high, and long-cut C16–18 alcohols were amply supplied. The market experienced a sharp turnaround in March and April as prices for palm kernel oil (PKO) and coconut oil rose significantly. This was compounded by maintenance shutdowns constraining Southeast Asian availability, and the Iran conflict pushing up crude oil, logistics, and petrochemical costs.
Prices for natural C12–14 alcohols increased rapidly in tandem with lauric feedstocks. However, the North American market also had to contend with the economics of synthetic alcohols. Initially, higher crude oil and ethylene costs elevated synthetic production expenses, while delayed natural alcohol imports reduced spot availability. Despite this, synthetic producers maintained high operating rates and generally preserved a cost advantage over natural materials. This effectively limited the extent to which natural alcohol suppliers could fully pass through their higher PKO costs.
The market subsequently corrected in May and June as palm kernel oil (PKO) prices softened and Asian maintenance programs concluded. Mid-cut prices experienced particularly sharp declines, although North America remained somewhat insulated due to ongoing import delays, elevated freight costs, and constrained spot availability. U.S. contract prices for Q3 eventually moved lower, reflecting weaker Q2 feedstock costs, while softer crude oil and ethylene prices concurrently improved the economic viability of synthetic alcohol production.
By July, PKO prices had rebounded, and Asian producers were more heavily sold forward, leading to renewed price increases in both Asia and Europe. The revised Section 301 framework also bolstered the position of natural fatty alcohols, as Indonesian and Malaysian materials were exempted from the additional 10% tariff. This removes a significant cost burden, although Southeast Asian natural alcohols must still navigate competition from a well-supplied domestic synthetic production sector in the U.S.
For the second half of the year, natural fatty alcohol prices are likely to remain supported if PKO values stay elevated. This outlook is particularly influenced by higher biodiesel blending mandates in Indonesia and Malaysia, which are expected to reduce the availability of palm and lauric feedstocks for export. Additionally, forecasts for a drier second half associated with El Niño could negatively impact palm yields and further tighten feedstock availability should weather conditions deteriorate. The implementation of the EU Deforestation Regulation (EUDR) might also redirect more European demand towards coconut-based materials, as coconut is currently excluded from the regulation, thereby adding pressure to an already tight coconut oil market. Nevertheless, cautious downstream demand, improving regional supply, and persistent competition from synthetic alcohols may collectively limit the extent to which higher feedstock costs can be fully passed through to consumers.
Glycerine did not require a new market driver in 2026, as its dynamics continued to be governed by established forces. The economics of biodiesel production remained the primary determinant of crude glycerine generation, while demand for Chinese epichlorohydrin (ECH) continued to be the major downstream influence on Asian glycerine pricing.
The year commenced with constrained crude glycerine availability, as biodiesel production experienced seasonal or economic weakness in the U.S. and Brazil. A subsequent reduction in refined glycerine imports further tightened the North American market, while low European biodiesel output restricted the supply of rapeseed-based glycerine. By March and April, suppliers in both regions found themselves sold out well in advance, and refined glycerine prices had risen sharply.
North America's glycerine market remained firm even as conditions in Asia and Europe began to stabilize. The force majeure declared by LyondellBasell for propylene glycol production led to increased demand for glycerine-based propylene glycol, absorbing additional crude material. Strong forward purchasing, persistent vessel delays, and limited refined availability kept some suppliers fully booked well into Q4.
Europe gradually moved away from panic buying, but tight rapeseed-based supply and weak biodiesel margins limited any significant price relief. Asia's market trajectory more directly mirrored the ECH cycle: falling ECH prices and weak epoxy resin demand drove crude and refined glycerine prices lower in May and June, before firmer ECH prices supported a July rebound that stabilized towards month-end.
Trade policy has played a less central role for glycerine compared to its impact on fatty acids or fatty alcohols. The product did not benefit from the same Annex II relief, and while higher U.S. tariffs have reduced the attractiveness of Brazilian exports, they have not fundamentally altered the underlying direction of the global glycerine market.
For the second half of 2026, increased biodiesel production across North America, Europe, and Asia is expected to gradually improve the supply of crude glycerine. However, North American crude glycerine prices may experience only limited downside, as seasonal cold-weather demand could provide supportive impetus, and the consumption of glycerine into propylene glycol remains a significant swing factor. Refined glycerine availability in the U.S. will also continue to depend heavily on imports from Asia. In Europe, improving biodiesel output may exert some downward pressure on domestically produced glycerine, although the year-end EUDR implementation deadline is anticipated to add compliance and traceability costs to palm-based glycerine imports. In Asia, the potential implementation or acceleration of Indonesia's B50 program could significantly boost glycerine by-product generation, while regional pricing will remain closely influenced by Chinese ECH market conditions.
Source: ResourceWise