Abstract
Volatility in Raw Material Prices Leads to Uncertainty in Revenues
Price pressures and falling profit margins are a significant issue in the world fatty acids
market. The volatile raw material prices that comprise 80 percent of fatty acid costs are magnifying
the challenge and making it increasingly difficult for manufacturers to maintain profit margins in
this market. Moreover, shifting consumer preference for vegetable oil-based products makes the fatty
acids industry more susceptible to harvest issues. While tallow and tall oil are less susceptible to
harvest issues, manufacturers of fatty acids will have to constantly track palm oil prices that are
depicting greater fluctuations. Severe competition, overcapacity, and the emergence of new fatty
acid manufacturing facilities in China and Southeast Asia add to the price pressures. Offering
competitive prices is likely to be a key strategy to survive in this highly competitive and price
sensitive market.
This Frost & Sullivan research service offers a comprehensive analysis of the global fatty
acids market, and focuses on the naturally-derived fatty acids. In addition to detailed insights
into market drivers and industry challenges, this study provides strategic growth recommendations to
vendors.
China to Open up New Growth Opportunities
"Saturation within the fatty acids market is restricting growth in developed countries and
compelling fatty acids manufacturers to sustain revenues by focusing on new and upcoming markets in
developing countries such as China," notes the analyst of this research. Economic growth in
China and the resultant rise in living standards have boosted demand for end user products, thereby
driving the growth of fatty acids market.
Many participants have taken strategic steps to move closer to their Chinese customers and are
investing in new manufacturing facilities in China to increase market share. Another strategy
adopted by many participants is to manufacture in Southeast Asia and then export to China.
Participants need to make a thorough analysis of production costs and accordingly choose the best
strategy.
Southeast Asia Hugely Influences the Global Fatty Acids Market
Availability of raw materials and sophisticated infrastructure is turning Southeast Asia into a
manufacturing hub for fatty acids industry. Local participants in Malaysia and Indonesia are
enhancing their manufacturing capacities in response to the rising export demands. Many plantation
companies in this region are also increasing investment in downstream activities.
"Facilities in developed countries are old and running costs are high," notes the
analyst. "As a result, many companies from these countries are shifting their operations to
Southeast Asia to take advantage of easy access to raw materials and relatively low operational
costs." Strategic alliances between companies in developed countries and their counterparts in
Southeast Asia are also on the rise and promise numerous growth opportunities for the world fatty
acids market in the future.
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