Aug 05, 2025
Malaysia’s palm oil production faced a 7% YoY decline in early 2025 due to adverse weather, contributing to tighter upstream supplies and reduced Palm Stearin availability by an estimated 20,000–40,000 MT per month in Q1.
Stearic acid prices may see a modest uplift of USD 20–40 per MT in H2 2025, driven by ongoing supply pressures and steady global demand from cosmetics and food sectors.
Indonesia’s recent increase in CPO export levy to 10% is adding to global supply constraints, potentially supporting higher prices amid firm oleochemical demand.
With CPO prices stabilizing around RM4,200–4,300/MT on Bursa Malaysia, market participants are monitoring weather and policy developments for further volatility.
Malaysia’s palm oil sector, a key driver of global oleochemical markets including stearic acid, continues to grapple with production challenges in 2025. The country produced approximately 95 million MT of Fresh Fruit Bunches (FFB) in 2024, leading to around 19.3 million MT of Crude Palm Oil (CPO). However, early 2025 saw a 7% YoY upstream production decline, primarily due to heavy rains, floods, and seasonal disruptions, which reduced February output by 7–15% and shrank stockpiles to 1.58 million MT—the lowest since April 2023. These factors have limited Palm Stearin—a critical fraction of palm oil used in stearic acid production—potentially tightening supplies for downstream industries like cosmetics, food additives, and lubricants.
Recent forecasts from the Malaysian Palm Oil Board (MPOB) indicate a slight recovery, with CPO production expected to rise to 19.5 million MT in 2025, supported by anticipated normal weather patterns. USDA estimates align closely, projecting 19.4 million MT for 2025/26. Nonetheless, long-term concerns persist, including ageing plantations and labor shortages that could reduce output by up to 20% by 2030. As of early August 2025, CPO prices on Bursa Malaysia hovered around RM4,230/MT (approximately USD 970/MT), reflecting a balance between rising inventories—projected at 2.25 million MT by end-July, the highest in nearly two years—and seasonal demand. These dynamics are rippling through the value chain, with Palm Stearin scarcity posing risks to stearic acid manufacturers.
Global stearic acid prices in the first half of 2025 showed regional variations amid supply pressures: USD 1,197/MT in the US, with similar levels in Europe around USD 1,170/MT in the Netherlands, USD 1,055/MT in Japan, and higher at USD 1,350/MT in India due to robust demand in plastics and personal care. Looking ahead, industry forecasts suggest stable-to-soft pricing in H2 2025 unless downstream consumption strengthens or unforeseen supply disruptions occur. The global stearic acid market is projected to grow at a CAGR of 7.7% from 2025 onward, reaching USD 51.35 billion by 2034, driven by expanding applications.
These developments are compounded by Indonesia’s policy adjustments. Effective May 17, 2025, Indonesia—the world’s largest palm oil producer—raised its CPO export levy from 7.5% to 10% to bolster domestic biodiesel programs and replanting initiatives. This increase, which also applies graduated rates to refined products (up to 9.5%), has raised concerns about reduced export competitiveness and tighter global supplies. Historically, such constraints have led to price volatility; for instance, European stearic acid prices reached USD 1,530/MT in Q3 2024 amid similar disruptions.
In conclusion, while Malaysia’s early 2025 production setbacks and Indonesia’s higher export levy are creating moderate supply pressures—potentially reducing Palm Stearin availability by 20,000–40,000 MT monthly in affected periods—the overall outlook for stearic acid remains cautiously optimistic. With CPO prices stable above USD 950/MT and steady demand in key sectors, prices could edge up by USD 20–40/MT in the coming months. Market participants should watch for weather updates and policy shifts, as these will shape a potentially dynamic second half of 2025.
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