Global Market Outlook on Synthetic Menthol
Global natural mentha oil are 0.3ThMT lower in 2017/2018, supply is likely to recover anticipating a 20-25 percent better this crop year, BASF force majeure since October 2017 has caused severe supply shortage in the global market.
- Price: BASF’s citral non availability, price speculation and macro economic factors support an overall increased prices in 2018, with H1 2018 likely to witness a significant menthol crystals price rise averaging at $40-45/kg
- Demand: Cosmetics and Pharma are fastest growing (~7 percent) end-use industries. Increasing sales growth of cigarettes (11 percent) and oral care (15 percent) are drastic due to change in lifestyle and increasing consumption in developing markets such as India, China, Indonesia, etc.
- Trade: Global natural and synthetic menthol trade volume is around 0.6MMT. India is the major exporter (34 percent share). China is a net importer (25 percent export share and 30 percent import share) and US (12 percent) follows
Value Chain and Production Process
Buyers can partner with BASF, though being the latest entrant into the market has proven its technological advancement and supplies sufficient stocks in merchant market
Category Takeaway: Feedstock availability, high yield rate, purity, cost efficiency and co product dynamics are major factors determining the success of any synthetic L-Menthol production process
Supply – Demand Dynamics
Suggestions for buyers: Supply availability being the concern, buyers may have to pay a price premium to avail stocks in short term
Category Takeaway: Global natural mentha oil are 0.3ThMT lower in 2017/18, supply is likely to recover anticipating a 20-25 percent better crop year. However current stocks are insufficient to support the supply gap created by BASF’s synthetic menthol. Even large FMCG buyers have switched to synthetics to cover immediate needs rather than cutting down on demand
- Mentha oil deficit for 2017-18 season was around 8 ThMT. Buyers either opted for synthetics to cover immediate needs or were cutting down on demand. This again lead to higher demand and hence higher prices of synthetic menthol. Overall 300MT of short supply was registered in 2017/18
- However this year the crop is expected 25-30 percent higher than last year, BASF is also claiming deliveries from this month. This turmoil should end soon
- Decrease in demand for synthetic menthol can happen only if the price difference between natural and synthetic menthol narrows. Since, synthetic menthol is already at lower cost benefit, price gap can be achieved only when natural menthol supply increases / prices decrease, which is unlikely in the short term