Mentha oil prices likely to recover by year-end

Mentha oil prices are likely to rebound in the near-term on export demand. The oil is used in cosmetics, pharmaceuticals and food industry.

Prices of mentha oil have fallen sharply during the year, tumbling 46.3 per cent to Rs 875.80 a kg from Rs 1,527.40/kg. This is likely to stimulate demand in the October-December quarter, the peak period for mentha oil exports.

India, largest producer

India is the largest producer and supplier of mentha oil in the global market. The country accounts for over three-fourths of total global production of mentha oil and domestic output has a significant bearing on the international market.

Domestic production of mentha oil is projected to drop by 15-20 per cent in 2013 to about 40,000-42,500 tonnes, according to brokerage Emkay Research. According to Food and Agriculture Organisation, global production of mentha oil was 62,828 tonnes in 2011-12, with India contributing around 50,000 tonnes.

The fall in domestic output can be largely attributed to a sharp fall in prices over the last two years. This dissuaded many farmers from cultivating pudina (mint), from which the oil is extracted.

Mentha oil prices hit a peak of Rs 2,475.90 a kg on February 4, 2012. The rate could not be sustained and by April, prices began to plummet and crashed to Rs 1,155.20 by June.

Mentha oil managed to rebound in the ensuing months until early this year. It climbed to Rs 1,527.40 a kg in February, but the price reversed abruptly on demand concerns and plunged to Rs 820.8 on August 12.

Below 5-year average price

The oil is now trading below its five-year average price of Rs 977.84, but is still appreciably higher than the rate that prevailed in 2008 and 2009 and for a major part of 2010.

As a result of the fall in domestic production, global supply could be tight. About 700 tonnes of mentha (spearmint and peppermint) oil were exported in the first three months of the current financial year, according to Commerce Ministry data. This is equivalent to about 20 per cent of total exports in the whole of 2012-13. With the peak season round the corner in international markets, there is likely to be an uptick in demand for the oil as consumers could take advantage of the low rates.

In the near-term, domestic prices will also be driven by the upcoming festival season. Mentha oil arrivals have been slow this year; arrivals usually vary between 300-350 drums of 180 kg each in July, but major markets have received only about 100 drums.

There is likely to be a significant rise in arrivals ahead of Diwali, which will be met by improved demand from the FMCG sector, particularly confectionaries.

Post-Diwali, large-scale demand is expected, driven by the pharma industry’s bulk purchases for use in cold and cough medicines, balm and other products. Besides this, mentha oil is increasingly being used in the manufacture of products such as ‘cool hair oil’.

>arvind.jayaram@thehindu.co.in