Lang
Palm Fatty Acid Distillate (PFAD) values have experienced a significant upward movement since mid-August 2026, mirroring the broader strength observed across the crude palm oil (CPO) market. This rally is primarily fueled by a confluence of factors: shrinking inventories, sustained demand from both oleochemical and biodiesel sectors, and ongoing geopolitical tensions that have kept freight and feedstock costs persistently high across major exporting regions. Given that crude palm oil serves as the principal cost determinant for PFAD, any upward pressure on CPO is directly translated into PFAD pricing in both origin and destination markets.
PFAD, a crucial byproduct of the palm oil refining process, has its price trajectory inherently linked to CPO. Malaysian CPO, on a Free On Board (FOB) basis, saw its price rise from $1.10 per kilogram on August 14 to $1.14 per kilogram by August 19, marking an increase of nearly 3.6 percent within a week. The Cost, Insurance, and Freight (CIF) benchmark reported a similar trend, climbing from $1.118 per kilogram to $1.158 per kilogram over the same period. The slight widening of the CIF-FOB spread indicates that rising freight and insurance expenses are contributing to the landed cost of cargoes. PFAD FOB Malaysia prices have followed suit, edging up from $1.07 per kilogram to $1.08 per kilogram week-on-week, and showing an increase of almost 4 percent since mid-July. This sustained strength in palm oil prices has tightened refining margins, leading to less surplus fatty acid byproduct entering the market and consequently hindering PFAD availability from keeping pace with steady uptake from downstream users.
Despite a marginal increase in Malaysian palm oil production in July, stock levels, though improved, remain constrained relative to consumption rates. Strong export demand, particularly from Indian buyers building reserves for the upcoming festive season and continuous interest from other markets, has prevented the accumulation of a substantial inventory buffer. This persistent imbalance between stock accumulation and depletion has kept the entire palm complex, including PFAD, on a firming trend throughout the first half of August.
Demand for biodiesel, especially from Indonesia where CPO maintains a price advantage over gasoil, continues to absorb a significant portion of palm-based feedstocks. This heightened competition for raw materials has a ripple effect on PFAD, which is increasingly being incorporated into biodiesel blending, alongside its traditional applications in soap manufacturing, oleochemicals, and animal feed. With global biofuel mandates remaining robust, PFAD faces multi-sector demand competition, providing an additional layer of price support.
Geopolitical disruptions and elevated risks across critical shipping lanes such as the Red Sea, the Strait of Hormuz, and the Black Sea corridor have introduced fresh cost burdens and uncertainties for global vegetable oil and fatty acid shipping. Reports from the Malaysian Palm Oil Council (MPOC) highlight that extended voyage times, higher insurance premiums, and rerouted vessel traffic have pushed freight rates upwards. These increased costs are subsequently passed on to landed prices in destination markets like Kandla, India. The CIF Kandla PFAD price has escalated more rapidly on a month-on-month basis than the FOB Malaysia benchmark, emphasizing that a substantial portion of the recent price movement is driven by freight and logistics rather than solely by feedstock costs.
In India, ex-factory PFAD pricing at Kandla has also been impacted by a weaker domestic currency and increased inbound logistics costs, even though the sequential movement over the most recent week was slightly softer. The year-on-year (YoY) increase of nearly 18 percent in rupee terms is considerably steeper than the dollar-denominated rise in FOB Malaysia PFAD. This disparity underscores how currency depreciation and domestic freight inflation are exacerbating the imported cost pressures for Indian buyers.
India's palm oil import volumes saw a sharp rise in July compared to the preceding month, as buyers shifted towards palm oil due to tighter availability of sunflower oil. This substitution effect extends to PFAD, as higher palm oil refining throughput in India typically leads to greater domestic PFAD generation. On a landed basis, PFAD CIF Kandla climbed from $1.09 per kilogram on August 14 to $1.115 per kilogram by August 19, representing a gain of approximately 2.3 percent over the past month and nearly 9 percent higher than a year ago. Notably, this rate of increase has outpaced the FOB Malaysia movement during the same period, indicating that freight, insurance, and import-side costs are adding an extra layer of pressure on top of the origin-market price. This trend has not yet been offset by the increase in domestic refining volumes.
Conversely, domestic ex-factory pricing at Kandla, quoted in rupee terms, exhibited a slightly different trajectory. PFAD Ex-Kandla eased marginally from ₹106.5 per kilogram on August 14 to ₹107.5 per kilogram on August 19, essentially remaining flat week-on-week and still below the ₹109 per kilogram level observed in mid-July. Nevertheless, on a year-on-year basis, this segment shows the steepest increase across the entire PFAD complex, up nearly 18 percent from August 2025. This reflects the combined effect of higher landed import costs, currency depreciation, and elevated domestic logistics expenses being transmitted through to converters and end-users within India.
Market participants are closely monitoring the fourth quarter, as seasonal production patterns typically suggest a decline in palm oil output coupled with a weaker oil extraction rate. If these forecasts materialize, PFAD supply could tighten further precisely when demand from biodiesel and oleochemical processors is expected to remain firm. This scenario would create conditions for sustained price support into the final months of 2026. Given that freight and geopolitical risk factors are unlikely to diminish rapidly, importing regions are expected to continue experiencing landed costs that rise faster than origin-market FOB prices.
Buyers in downstream industries, including soap manufacturing, animal feed, oleochemicals, and biodiesel blending, should prepare for continued near-term price firmness. Simultaneously, they should remain vigilant for any signs of production recovery in Malaysia and Indonesia, which could eventually alleviate the current supply tightness. The global PFAD supply chain remains concentrated among a few large, vertically integrated palm oil companies that dominate both crude palm oil refining and the production of downstream fatty acid derivatives.
PFAD prices are projected to maintain their firm stance in the near term, underpinned by stronger CPO values, limited inventory buffers, and unwavering demand from the biodiesel and oleochemical sectors. For Indian buyers, the combined impact of freight, currency fluctuations, and domestic logistics costs could render landed prices particularly susceptible to external shocks. While a seasonal decline in palm oil production during the fourth quarter might further tighten PFAD availability, a potential increase in refining output in India and a recovery in Southeast Asian production could offer some relief. Source: Fibre2Fashion