US oleochemical producers will continue to switch operations towards palm-based fatty acids at the expense of tallow in 2024.
With US buyers now actively opting towards plant-based alternatives for their personal care and cleaning products, producers with the capability have switched their operations to palm. Others are looking to shift production over.
And with food habits changing in the US, the rendering of red meats has declined. US Department of Agriculture data show cattle slaughter rates have been trending lower, this provides insight into supplies of the rendered fats used as soaps, animal feed and feedstocks for renewable biofuels and oleochemicals. Approximately 50pc of a slaughtered animal is used for human consumption and the remainder is rendered.
Although tallow consumption continues to grow in the US biofuels industry, with biofuels firms having met their mandates for 2023, demand has fallen and US tallow values have declined. But they remain at a premium to palm feedstock costs, which remain the most economical option for oleochemicals producers.
The average bleached fancy tallow (BFT) prices was around 46.50¢/lb on 11 December, a significant decline from an average of 67.50¢/lb in the same week in 2022. Average year to date BFT values are at 60.25¢/lb, down from 15.50¢/lb year-on-year, according to Argus data.
With palm-based products growing in popularity, the consensus amongst participants is that producers who manufacture purely tallow-based fatty acids risk being priced out of the market.
Crude palm oil (CPO) values are far cheaper with average prices around $841/t. With freight rates at depressed levels, the cost of shipping palm oil from southeast Asia is an economical option for producers. US CPO imports have been steadily increasing, and these are likely to grow in 2024 as palm-based production rises.
Global Trade Tracker (GTT) data show the US reported 1.32mn t of CPO imports in the January-September period this year. Should CPO imports continue at the same pace throughout the fourth quarter, this would give a yearly total of 1.77mn t, the highest amount imported to the US since GTT records began.
Palm-based fatty acids imports to the US are also likely to climb next year, with increases seen since the introduction of EU anti-dumping duties on Indonesian fatty acids imports earlier in 2023. GTT data show fatty acid exports — excluding tall oil fatty acids — from Indonesia to the US were 101,000t in the first six months of 2023, a 17pc increase on the 86,000t that was shipped during the same period a year earlier and almost double the 53,000t exported to the US during the corresponding period of 2021.
With consumption from China not anticipated to drastically improve in 2024, the US remains one of the few markets open to shipments of palm-based fatty acids. Many expect imports to the US to continue gaining as a result.
