Castor oil exports may dip 6% on low China demand

India's castor oil exports are expected to fall six per cent due to reduced demand from Chinese sebacic acid manufacturers.

As against total castor oil export of 424,000 tonnes in 2012, industry insiders expect India's castor oil exports to be 400,000 tonnes this year. Of the total castor oil exports in 2012, 180,000 tonnes or 45 per cent was exported to China alone. China, the biggest consumer for India's castor oil, uses most of the oil for manufacturing of sebacic acid, a castor oil derivative and exports most of the production to Europe and the US.

"The economic situation in Europe and US has weakened and there are grim prospects of an increase in consumption of sebacic acid. If demand remains subdued in these nations, castor oil export to China will be less," said Shwetal Vakil, chairman, SEA Castor Seed and Castor oil committee.

Sebacic acid is mainly used in the production of nylon, plastics additives, adhesives or resins and candles. According to industry sources, Chinese sebacic acid producers have incurred huge losses due to sustained fall in sebacic acid export price from $5,200 a tonne in May 2011 to $3,800 a tonne in November 2012.

The fall in prices is due to a sharp decline in demand for sebacic acid from the US and European countries. Also, China's castor oil consumption has been on a decline since 2010, from 219,000 tonnes to 210,000 tonnes in 2012. While sebacic acid exports from China have fallen from 47,317 tonnes in 2010 to 39,689 tonnes in 2012.

"It is believed that India's castor oil export to China may fall 5-10 per cent to 160,000-165,000 tonnes this year," said F R Khodaiji, director, Pratima Exports Pvt Ltd. International castor oil prices are likely to remain weak due to sluggish demand scenario.

According to traders, international castor oil prices have fallen from $2,800 a tonne last year to around $1,350-1,400 a tonne recently.

"While castor crop is likely to shrink this year, we do not see much impact on castor oil prices as the international demand is likely to remain weak," added Vakil.

Meanwhile, analysts are still hopeful about castor oil exports from India to match last year's levels. "China's castor oil demand is still not clear. But looking at the previous trend, we are hopeful that in February-June period Chinese imports will rise, while from October onwards they may start falling," said Prerna Sharma, research analyst, Emkay Comtrade Ltd.

According to the market sources, in 2012 China's sebacic acid production and sales both took a beating, while in the first half of 2013 same trend is expected to continue.