Menthol

Menthol Global Market Outlook:

• The global mint essential oil is estimated to reach approx. $330.02 million by 2025, expanding at 8.8 percent CAGR between 2020 and 2025. Jamaica is expected to take on the global market of essential oils by incentivizing and improving production.

Natural Menthol Production Trends

• Natural menthol production is expected to witness only a slight increase during 2023. The climatic conditions, like heat waves, drought and increased input cost, are the factors being limiting for production. The government regulatory banning mint in the tobacco industry

• Area planted in major producing regions, like Uttar Pradesh, Haryana, etc. Natural menthol contributed to more than 70 percent of the market share, but this contribution is expected to decrease with synthetic menthol gaining more and more popularity. Planting in India, a major producer of natural menthol, increased in 2021-22 when compared Y-o-Y. However, poor weather is expected to affect the yield levels and the Mentha oil production is expected to be lower than previous estimates. Further, the anticipated increase in demand from the consuming industries in the spot market is likely to ensure that the prices increase in the coming season

• The Aroma mission is expected to promote production and improve the quality of production in the upcoming years

Natural Menthol: Cost Break-up

Scope for price negotiation would be comparatively less, as the raw material contributes to more than 60 percent of the cost. The fragmented nature of the raw materials market restricts the buyer’s bargaining power due to difficulty in consolidation

• Natural menthol is extracted from mentha arvensis oil through a series of process including fractional distillation, cooling, centrifugation, and drying

• Raw material cost (mentha oil cost) is the largest contributor (about 60 percent) to the overall cost of production of menthol. Hence, the fluctuation in the prices of menthol crystals are closely linked with fluctuations in the prices of mentha oil

• Other cost components include wages, utilities, depreciation and overheads, etc., each of these have almost equal contribution to the final cost

• Pressure in the cost of menthol is expected, as the production has reached a multi-year low with falling carry over stocks and strong export demand

Natural vs. Synthetic Menthol Growth Trends

• Share of natural menthol in the global menthol supplies is estimated to increase toward approx. 60 percent by 2021, from 58 percent during 2020. Altering weather pattern and steady demand have supported the emergence of synthetic menthol in the last five years.

• Natural menthol supplies are predominantly dependent on the Indian farmer planting sentiments and weather patterns. This paved way for the industrial shift toward synthetic menthol production, which gained momentum during this decade

• Since 2013, the menthol market is oversupplied with carryover stocks of 3,000–4,000 MT/annum, leading to drop in prices and lower acreage.

• Synthetic menthol production is expected to increase from the current level of approx. 12.5 Thd MT, with a new capacity addition from the BPC aroma chemical plant (BASF–PETRONAS Chemical). However, production of BASF is anticipated to be curbed this year, owing to setbacks in the Malaysian plant

Impact of Industry Trend Shifts on Menthol Price

• With the high prices for last year’s production, farmers were enthusiastic, so increased acreage planted. However, due to poor weather conditions and flooding in some of the major producing regions in India, the crop yields are expected to be much lower than previous estimates.

• Availability of oil is expected to be low for the same reason, hence prices are expected to remain high.

• Reports from India are disturbing. Unfavorable climatic conditions influencing the crop production and yield of the crop negatively

• However, the production and yield are estimated to be lower than previous year the regulations not only in India but also by other leading economies have interfered in the tobacco industry resulting in poor demand for menthol consumption making the oil price to be between flat and negligibly high

Menthol-Cost Driver and Demand Analysis

Mentha oil is processed into menthol and the industry use them as menthol crystals; raw material contributes to more than 60 percent of the cost. Thus, it is important to track the dynamics of mentha oil on a regular basis to understand menthol price and its supply trend. Menthol demand from China, competition from synthetic menthol are likely to affect the prices

• Synthetic menthol has grown in the recent past by subsuming natural menthol’s market share in some of the downstream applications

• Demand for menthol cigarettes is growing especially due to a drastic increase in consumption in developing markets such as India, China, Indonesia, etc.

• The perfumes category is likely to lift the demand for synthetic menthol in the emerging markets. Usage of mint fragrances as top notes in many of the cosmetic products is likely to support the demand of menthol from the cosmetic industry basket

• Industry experts believe that pharmaceutical buyers will continue to move toward natural menthol to mitigate regulatory risks and due to the preference of natural ingredients in developed countries