Excessive Competition and Overcapacity in Fatty Acids Markets Intensifies Price Pressures

Business Wire, May 4, 2005

PALO ALTO, Calif. -- Increasing competition and overcapacity in the fatty acids market is creating immense price pressures and tightening profit margins for manufacturers. Moreover, volatile raw material prices that account for 80 percent of fatty acid costs impact the market revenues enormously. Offering competitive prices would be a key strategy to survive in this highly price sensitive market.

New analysis from Frost & Sullivan (http://chemicals.frost.com), Global Fatty Acids Markets, reveals that revenue in this market totaled $3.84 billion in 2003 and projects to reach $4.59 billion in 2010.

If you are interested in a virtual brochure, which provides manufacturers, end-users and other industry participants an overview of the latest analysis of the Global Fatty Acids Markets, send an email to Tolu Babalola - Corporate Communications at tolu.babalola@frost.com with the following information: your full name, company name, title, telephone number, fax number and email. We will send you the information via email upon receipt of the above information.

"A shift in consumer preference for palm oil as raw material has made the industry more vulnerable to harvest issues," explains Frost & Sullivan Research Analyst Syamala Ariyanchira. "Hence, participants face the challenge of tackling uncertainty in revenue owing to the unpredictable nature of palm oil prices."

An essential strategy to face price pressures and sustain revenue is to move operations to Southeast Asia for easy access to raw materials, relatively low operational costs and better infrastructure. Consolidating manufacturing plants and forging long-term contracts with plantation companies are other key strategies for price control.

Increasing demand for end-user products due to improved living standards in Asia in general, and China in particular, continues to drive the growth of world fatty acids market. China also offers new growth prospects with the maturing of markets in developed countries. Participants expect to move closer to their Chinese customers and invest in new manufacturing facilities to increase market share.

However, development of new production facilities in China and Southeast Asia is likely to cause overcapacity in the global fatty acids market. In addition, existing participants face an increasing threat from cash-rich plantation companies moving downstream. These factors anticipate adding to price pressures.

Key strategies to tackle price wars would be to focus on customer-specific services such as improved delivery time and customized products and solutions. Furthermore, focusing on vertical integration of the value chain can aid participants in sustaining revenue.

"Strategic alliances between global chemical companies and Southeast Asian companies are also on the rise and promise to improve productivity and offer new growth opportunities for fatty acid markets," notes Syamala.

Global Fatty Acids Markets, part of the Chemicals & Materials subscription, evaluates the market focusing on the naturally derived fatty acids. In addition to detailed insights into the market drivers and industry challenges, this study provides strategic growth recommendations to vendors. Executive summaries and interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com.

Global Fatty Acids Markets

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Keywords in this release: fatty acids, global, palm oil, tallow, raw material, stearic acid, oleic acid, distilled fatty acids, volatile, prices, pressure, China, Southeast Asia, plantation, vegetable oil, developed countries, saturation, glycerin, overcapacity, research, information, market, trends, technology, service, forecast, market share