CASTOR OIL - IT PROMISES BIG PROFITS

[PATIENCE PLEASE!]
Owing to its variety of end-uses, castor oil is one of the most sought
after plant oils. But reduced production and fall in its global prices, have
made it a tough commodity to make big profits out of through exports.
The future appears encouraging though.
Neha Dewan | Novermber 2015 Issue | The Dollar Business
Centuries ago, the castor plant was revered because of its healing
properties and referred to as “Palma Christe”, apparently because its
leaves resembled the hand of Christ. Research suggests that castor oil
was used for therapeutic purposes in ancient Egypt. The science and
research on therapeutic value being sparse and the seed or bean being
toxic to the human body in general, unless treated and labelled as
edible, castor oil is used mostly for industrial purposes.

One Seed. Two Tales.

Castor seed (Ricinus Communis) is one of the major oilseeds cultivated
in arid and semi-arid regions. According to experts, most suitable soils
for castor cultivation are deep, moderately fertile, with slightly acidic
conditions, well drained, and sandy loams. India, having the ideal
conditions of cultivation, has been enjoying a virtual monopoly in this
segment, as is evident from the fact that the country accounts for 75%
of the total castor seed production of the world, followed by China and
Brazil. In India, Gujarat is the major castor oil producing state
accounting for approximately 75% of the total domestic production,
followed by Rajasthan and Andhra Pradesh.
Castor oil of non-edible grade is renowned the world over as one of the
most versatile of all oil types for industrial purposes. It’s used
extensively in wide-ranging commercial segments including in the
manufacturing of cosmetics, paints, synthetic resins, adhesives, brake
fluids, lubricating greases among others. Some of the properties that
make castor oil ideal for industrial purposes are its high specific gravity,
thickness and hydroxyl value. This is perhaps the reason that the
exports of the non-edible grade of castor oil has grown by about 12
times (by value) over the last decade, from $56.17 million in FY2006 to
$703.81 million in FY2015. Exports of the edible grade, on the other
hand, has nose-dived over the decade. There was a time, in FY2006,
when India exported $134.69 million worth of the edible grade, which
was more than double that of the non-edible grade, whereas in FY2015
the export value has dropped to a miniscule $0.16 million. The demand
for the edible variant fell sharply in FY2009 and has been declining ever
since. A big reason as industry participants claim for this fall is the
availability of cheaper edible alternatives.
MONOPOLY BY DEFAULT
India, as the largest producer and exporter of castor oil in the world, is
responsible for almost 83.65% of total global exports in this segment.
Its main trading partners in this specific sector are China, Europe,
Thailand and Japan. China has been one of the biggest growth drivers
for castor oil due to its demand for sebacic acid (a basic industrial
chemical compound) which is developed from this oil. China currently
imports 30.67% of its total castor oil requirement, valued at $215.87
million, from India. However, despite these glorious numbers, India
continues to be a price taker and not a price setter in the global castor
oil market. One major reason being that India became the largest
producer of the seed by default. Brazil, which in the 70s was the largest
producer of castor seeds in the world, moved away from this seed to
soyabean which has a higher yield and greater export demand for both
its beans and oil. So did other major countries, leaving India with a
virtual monopoly. Ironically, with synthetic substitutes being available at
cheaper prices, India has not been able to leverage this monopoly.
"Although castor oil exports will rise this year, margins will
remain low"
Veeresh Hiremath, Research Head – Commodities, Karvy Comtrade
reasons that since the consumption within India is limited, the country
depends on other countries to get buyers for castor oil. “More production
is happening in India due to an increase in acreage and yield levels.
Major importing countries, mainly industrialised nations, require more
castor oil for their industries and they have the control over price.
Hence, India has to obtain export prices to clear off its inventories,” says
Hiremath.
Besides, a lack of adequate infrastructure and value additions are a
couple of factors which are also responsible for making India a weak
player on the price front. Experts suggest that this anomaly can be
corrected if the industry expands the market by developing castor oil
derivatives and invests in R&D. They unanimously believe, if the industry
works as a more cohesive unit, India could soon be in a better situation.
“India is the largest producer of castor oil and the entire world is
dependent on it. By that logic, we should be the price setters easily. If
this was the scenario in China, they would have been calling the shots.
Here, we all cut corners and the entire industry is working against each
other rather than as a whole. The situation could be addressed
considerably if we were more united as an industry,” feels Samir Patel,
Director – Exports at Shivam Agro Process, a Palanpur (Gujarat)-based
manufacturer and exporter of castor oil. This is a sad situation to be in
considering India’s monopoly in the trade.

Upping the Ante

In India, the planting season is typically during July or August and
harvesting is done during the months of December or January. In the
current Kharif season, castor seed has been sown in an area of 11.01
lakh hectares against 10.19 lakh hectares planted last year. “This
acreage is above the five-year average acreage of 10.36 lakh hectares.
This increment in sowing area, despite the erratic monsoon conditions,
shows that the farming community in India still has huge aspirations
from castor seed and its oil. It is highly expected that castor acreage will
increase in future,” adds Hiremath.
Despite being the biggest producer and exporter of castor oil, India obtains export prices that hardly reflect this monopoly.

Following the dip in export volumes last year, it is predicted that there
would be an increase of 30% in castor oil exports in the current fiscal.
Factors such as the rising demand from China, US and EU, as well as
more stable prices this year, are helping in getting the numbers back on
track. But does this increase in global demand in any way imply an
impact on the domestic market? “There will be no impact on the
domestic market since a very small proportion – only about 50,000 or
60,000 MT – i.e. less than 10% of total production, is used for domestic
consumption. An average increase of 5% in demand is witnessed every
year. If the castor oil prices are higher, people end up going for soybean
oil as a substitute instead,” explains Patel.
Calling the shots?
The Solvent Extractors Association of India (SEA) forecasts that the
Indian monopoly of Castor production in coming years could be
challenged if some Brazilian companies succeed in their efforts to plant
high-yielding beans on large tracts of lands in Brazil. On the price front,
consuming markets are expected to remain well-stocked since a lot oil is
lying repositioned and this will put a check on prices. The association
points at the need for taking simple steps such as simplifying VAT refund
to ease the financial strain on exporters, especially in the biggest castor
oil producing state Gujarat. Other incentives to exporters such as those
related to technology can also help to enhance the productivity.
Investment by the government in R&D for better quality hybrid seeds,
setting up of the necessary agri-infrastructure and imparting knowledge
to improve the yield of the crop could boost castor seed production in
the country. India is in a sweet spot when it comes to leadership in
production. But given the near zero to negative margins in exports of the
commodity at present, recommendation would be to revisit the idea after
the next harvest. And ambitious though, but perhaps by then, India will
have started calling the shots.

Castor seeds have an oil content of about 50%.

“There is no profitability to speak of”

Samir Patel DIRECTOR – EXPORT, SHIVAM AGRO PROCESS

TDB: Give us a brief overview of India’s castor oil exports. Could
you elucidate the factors that have positioned India as the
biggest producer and exporter of castor oil in the world?
Samir Patel (SP): India accounts for about 80% of castor oil production
of the world. The climatic and environmental conditions for castor seed
production are most apt in India. The castor crop requires temperatures
ranging from about 7 to 35 degree celsius. It is a nine-month crop and is
sown around July-August and harvesting commences around April. As
castor seed prices in international market hardly fluctuate, the price-
oriented farmers overseas are not so keen in its cultivation.
TDB: There are reports that suggest India’s castor oil exports are
expected to rise 30% y-o-y in FY2016. Do you think this is a
realistic expectation given the weak demand over the last few
fiscals? If yes, how do you think this can be achieved?
SP: I would say, the demand is less and the supply is more at present.
However, compared to the last year, the demand for castor oil has
grown since the prices have been stable. Prices have been in the range
of $1,200-$1,300 per metric tonne. For us also, exports have risen 13%
this year vis-à-vis last year.
TDB: What kind of an impact would this demand have on the
domestic market? Do yo see a price rise?
SP: There will be no impact on the domestic market since a very small
proportion – only about 50,000 or 60,000 MT – is used for domestic
consumption. An average increase of 5% in demand is witnessed every
year. If castor oil prices are higher, people end up choosing soya oil as a
substitute.
TDB: What makes castor oil so versatile as a plant oil?
SP: In the last 7-8 years, a lot of new derivatives have been developed
from this industrial oil. Castor oil and its derivatives have varied
applications in the manufacturing of biodegradable plastics, sebacic acid
and soaps, making it quite versatile. Besides, it is also used in paints,
cosmetics, lubricants, etc.
TDB: Can you gives us an idea of the margins involved in the
castor oil-trade – from the farm to export markets? Which
factors affect these margins?
SP: The industry works on negative margins! There is no profitability
really to speak of. There are primarily seven to eight manufacturers in
the trade who are mainly into exports, so that their import duty can be
waived off. One has to keep the short or long position in mind as far as
its trade is concerned.
TDB: Do you think there is a need to improvise existing
government policies/incentives and/or introduce new ones to
boost the exports?
SP: The incentives given by the government to boost exports is in turn
taken up by the local manufacturers, and then passed on to foreign
buyers in a bid to increase volumes. So, if the government can disclose
the incentives at the end of the year rather than earlier, it can help
boost exports of the product.
TDB: Do Indian exporters realise the potential of the product?
Isn’t there a scope for further improvement?
SP: Indian manufacturers are not taking the complete benefit of castor
oil exports, as India is the largest producer of castor seed. There are
chances for improvement if all manufacturers stand united.

“Exporters have to obtain export prices to clear Their

inventories”

Veeresh Hiremath RESEARCH HEAD –COMMODITIES, KARVY

COMTRADE

TDB: Which factors, according to you, have positioned India as

the biggest producer and exporter of castor oil in the world?
Veeresh Hiremath (VH): India has emerged as the largest producer
and exporter of castor oil in recent times. Exports of castor oil from India
have seen an upward trend year-on-year, except in the last fiscal. In
FY2015, India exported 4.59 lakh tonne of castor oil, which was less by
2.72% as compared to FY2014. Although the export quantity was lower,
the earnings were higher due to the increased oil prices. During April-
July 2015, India’s castor oil exports stood at 1.71 lakh tonne against
1.68 lakh tonne exported during the corresponding period last
year. Increasing the area under castor cultivation, and thus increased
castor production, has helped India become the biggest producer of
castor oil in the world. Thanks to the efforts by the Indian government
and industry bodies alike, to boost sales and exports, the country is also
the largest exporter of castor oil.
TDB: India is the biggest exporter of castor oil, yet it obtains
export prices that hardly reflect its near-monopoly. What
accounts for this anomaly?
VH: Since the consumption of castor oil is limited in India, and more
production is taking place due to an increase in acreage and yield levels,
India is dependent on exports to generate revenues for the commodity.
Major buyers for India’s castor oil are countries which require oil for their
industries. So they have control over price. Hence, India has to obtain
export prices to clear its inventories.
TDB: Data shows that prices of the non-edible variant of castor
oil in the international markets have been falling over the last
few years. What factors are responsible for this fall?
VH: The increased usage of castor oil substitutes has resulted in a
decline in castor oil prices.
TDB: Do you expect acreage to increase for castor seed in the
near future?
VH: In the current kharif season, castor seed has been sown in an area
of 11.01 lakh hectares against 10.19 lakh hectares cultivated last year.
This is higher than the 5-year average acreage of 10.36 lakh hectares.
This improvement in sowing, despite the erratic monsoon conditions,
reflects the sentiments of farming community that is hopeful of a good
return. Moreover, with India being the single largest producer of castor
oil – catering to the demand from all major industries – it is expected
that castor acreage will increase in future.
TDB: What factors would you attribute to the bullish outlook for
castor oil exports this fiscal?
VH: Rising demand for castor oil from China (despite their slowing
economy) is causing the bullish outlook for India’s exports this fiscal.
Moreover, castor seed production is going to be bumper in the current
season, which signifies that India would export more castor oil.
TDB: Do you think there is a need to alter the existing
government policies/incentives and/or introduce new ones to
give impetus castor oil exports? What revisions do you
recommend as far as export prices are concerned?
VH: Considering the limited castor oil consumption in the country and
the present policy guidelines for its export, no revision of the policy is
required. However, the government should encourage exporters by
providing various incentives such as cash incentives to export more oil,
and technology incentives to help enhance the productivity meet
international standards.

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Castor Oil Derivatives Market (2023 to 2033)

The castor oil derivatives market is expected to expand its roots at an average
CAGR of 4.9% during the forecast period. The market is likely to hold a revenue of
US$ 1.37 billion in 2023 while it is anticipated to cross a value of US$ 2.21 billion by
2033.

The research report on the castor oil derivatives market states that the long range of
skin and hair benefits are expected to garner the sales of castor oil derivatives. The
usage of castor oil in face and skin moisturizers, mixed oils, cosmetics, and biodiesel
makes its market dynamic. Furthermore, the rising trend of end users preferring
cosmetic and skin care products that have organic elements in them is also adding
value to the market’s upward trajectory. Apart from the medical benefits like
enhanced immunity and better blood circulation, personal care brands are also
introducing castor oil derivatives as a joint pain reliever as it helps in treating
arthritis.

The hair care brands also sell raw castor oil along with its derivatives and oil mixtures
for stronger and thicker hair. Alongside this, the increasing pollution, heat structures,
and UV penetration have pushed people to look for natural and organic elements
that heal their dry, irritated sunburns. The castor oil also carries properties that help
people with acne-prone skin. This long range of applications brings a lot of
opportunities for the

Castor oil derivatives market analysis explains that the growing cosmetic industry in
developing and developed nations are shifting towards herbal solutions. The
application of natural oils and herbs for skin and hair treatment has become a thing
now. The effective omega-6 fatty acids are helping market players produce products
claiming them to carry the omega-6 fatty acid, that helps in hair and skincare. These
derivatives are gaining popularity due to their superior chemical properties. Leading
ingredient manufacturers are introducing castor oil-based ingredients to capitalize
on opportunities in the green chemicals market.

Castor oil and its derivatives have significant advantages over other vegetable oils
due to their unique fatty acid structure. Cotton, coconut, soy, corn, and rapeseed
oil applications are mostly limited to edible purposes. The castor oil, that is extracted
through the castor bean seeds has different by-products like castor oil me, castor oil
meal, castor seed hulls, castor hulls, and husks.

Attributes Details

Castor Oil Derivatives Market CAGR (2023 to 2033) 4.9%

Castor Oil Derivatives Market Size (2023) US$ 1.37 bi

Castor Oil Derivatives Market Size (2033) US$ 2.21 bi

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How is the Future Outlook (2023 to 2033) for Castor Oil
Derivatives Market in Comparison to the Historical Pattern
(2018 to 2022)?

Short-term Growth (2023 to 2026): Wide range of applications, new organic

brands entering the market, and a flourishing cosmetic market is expected to fuel the
market growth. Furthermore, other applications like lubricants, medical,
pharmaceuticals, and bioenergy are fuelling the market growth. With a long range of
applications, the market is expected to hold US$ 1.37 billion in 2023 while it is
anticipated to reach US$ 1.58 billion by 2026.

Mid-term Growth (2026 to 2029): This period is expected to follow the same trend
as before. The new companies focusing on natural oils and cures are projected to
increase the consumption of castor oil derivatives. Its expanding medical application
of it is anticipated to add value to the market growth. These cosmetic applications
are projected to take the market value from US$ 1.58 billion in 2026 to US$ 1.82
billion in 2029.

Long-term Growth (2029 to 2033): New product launches and the by-products
such as mixed oils, lotions, and creams are likely to flourish the market success
during this period. Alongside this, its usage in bio-energy projects and extended
research and development programs are thriving in the market. Thus, the market is
anticipated to thrive at an average CAGR of 4.9% between 2023 and 2033.

What Growth Drivers Flourish in the Market?

The higher demand for chemical-free skin and hair care products coupled with castor
oil’s higher-end effectiveness over the immune system and issues like constipation
makes its products inclusive. Moreover, the brands showcasing the benefits of castor
oil such as omega-6 fatty acids are also transforming the market. The clean-label
product packaging is also in demand for expanding supply chains and distribution
channels. The increased response from the end user’s end has added motivation to
organic cosmetic companies. These companies are now producing different lotions,
mixed oils, and lubricants for different skin and hair types. The green chemical trend
is also along with its super chemical properties that benefit a long range of
applications and is expected to cater to market growth.

Nikhil Kaitwade

Principal Consultant

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What are the Major Restraints in the Castor Oil Derivatives

Market?

Some of the major restraints for the castor oil derivatives market are poor extraction
techniques, lack of innovation, and higher demand for chemical-based cosmetics,
and alternatives. Furthermore, the raw material availability, weather uncertainties, a
lack of working capital, extraction techniques, and methods are also limiting the
growth of the castor oil derivatives market.

Comparative View

Castor Oil Derivatives Market:

Attributes Castor Oil Derivatives Market

CAGR (2023 to
4.9%
2033)

Market Value US$ 2.21 billion

 (2033)

The higher demand for natural and green chemicals, higher benefits for skin and hair ca
Growth Factor consumption through mixed oil, lubricant, and cosmetic products are flourishing the de
oil derivatives.

Apart from the long range of applications, personal care usage, medical and pharmaceu
Opportunity
applications are expected to bring new opportunities for the market.

The utilization of castor oil derivatives in bio-energy projects and cleaning and storing d
Key Trends
shaping the growth trends.

Essential Oils Market:

Attributes Essential Oils Market

CAGR (2023 to
7.8%
2033)

Market Value
US$ 49.78 billion
(2033)

The rising global trend of choosing herbal, natural, and organic personal care products
Growth Factor
marketing campaigns, and a long range of applications fuel the sales of the essential o

Emerging economies like China and India are helping the flavor research and developm
Opportunity
along with the expanding cosmetic industry is bringing new opportunities for the mark
 The higher demand for orange flavor essential oil with skin, nails, and hair healing prop
Key Trends
the growth trends.

Green Chemicals and Materials Market:

Attributes Green Chemicals and Materials Market

CAGR (2023 to
9.4%
2033)

Market Value
US$ 299.84 billion
(2033)

Higher sales of natural and green by-products of green chemicals, affordable prices, so
Growth Factor
trends, and expanding manufacturing units are expected to garner market growth.

The advanced research and development facilities for green chemicals and their benefi
Opportunity
sustainability, effectiveness, and lower side-effects are flourishing the opportunities for

Increasing government initiatives for infrastructural development, and sustainable prod

Key Trends
up the market trends.

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Country-wise Insights

Countries Revenue Share % (2023)

 United States 10.3%

Germany 5.8%

Japan 3.6%

Australia 0.9%

Countries CAGR % (2023 to 2033)

China 5.4%

India 5.9%

United Kingdom 3.7%

How does the United States Perform in Castor Oil Derivatives Market?

The Expanding Cosmetic Industry along with the Advanced Sustainable

Applications of Castor Oil Derivatives fuel the Regional Growth

The United States market holds a market share of 10.3% in 2023. The regional market
is the leading market in the North American region. Though, the North American
region doesn’t lead in the market space. The United States market thrives at the
growing green trend that involves end users adopting everything herbal and organic.
This pushes the demand for natural oils and materials in the cosmetic and personal
care industry.

Why is the Asia-Pacific Considered an Important Region in Castor Oil

Derivatives Market?

Higher Consumption, Production Facilities, and Innovative Brands are

Garnering the Regional Growth

The Indian castor oil derivatives market leads in terms of CAGR in the Asian region.
The Indian market is expected to thrive at a CAGR of 5.9% between 2023 and 2033.
Though, China with its 211 kilo tonnes capacity is a global leader in the production
and export of sebacic acid.

India has become a producer and exporter of castor oil and castor oil derivatives
such as 12-hydroxy stearic acid, castor wax, dehydrated castor oil, and undecylenic
acid. This has happened due to the enhanced abundance of castor seeds.

India currently exports to China, the United States, and the European Union. Solvent
Extractors Association of India states that China consumes approximately value of 41
percent of India's castor oil exports.

How does Europe perform in the Market?

While the German market holds a market share of 5.8% in 2023. The regional market
has been able to score sales due to cultural transformation and government efforts.
For example, the European Commission introduced a "Green Deal" in 2019 to make
Europe carbon-neutral by 2050. This agreement is supported by policy reforms and
the adoption of green technologies and chemicals. Thus, producers, exporters, and
even end users are choosing green extraction, processing, and packaging for their
products.
Category-Wise Landscape

Category By Application

Leading Segment Pharmaceutical

Market Share (2023) 22.5%

Higher Consumption as it Helps in Building Strong Immunity and is Effective

Against Constipation

Based on application, the pharmaceutical segment leads as it holds a major market

share of 22.5% in 2023. The growth of this segment is attributed to the increased
pharmaceutical practices including castor oil derivatives. Polyoxymethylene castor oil
as a non-ionic surfactant is an approved pharmaceutical excipient.

Competition Scenario

The key players work on the purity levels of these derivatives. Furthermore, the
different applications of castor oil derivatives demand different processing. Hence,
the unique application-specific approach is also a strategy that castor oil derivatives
market players add to their marketing space. Other than this, the collaborations and
extended research and development facilities are also expected to help the
competitors.

How can Castor Oil Derivatives Vendors Providers Scale their Businesses in the
Market?

Market players in the market are working on three major strategies.

 Social media promotions, reviews, and expert testimonials are one part of the
competitive strategy.
  The expanding research and development facilities that work on product
sustainability.
 Taking advantage of government initiatives towards green chemical usage.

Market Developments

 BASF SE launched Lamesoft Balance, a hydrogenated castor oil-based product to

stabilize ingredients in hair and skin cleansing formulations. The product is likely to
help the homogeneous rheology through cleansing formulations.
 Thai Castor Oil Industries Co. Ltd. has launched the castor oil number one grade with
essential free fatty acids, moisture & volatile, etc.

Key Players

 BASF SE
 Hengshui Jinghua Chemical Co., Ltd.
 N.K. Proteins Pvt. Ltd.
 Thai Castor Oil Industries Co. Ltd.
 Sebacic India Pvt. Ltd.
 HOKOKU Co. Ltd.
 Adani Wilmar Ltd.
 Gokul Agri International Ltd.
 RPK Agrotech
 Arvalli Castor Derivatives Pvt Ltd.
 Krishna Antioxidants Pvt. Ltd.

Key Segments Covered

Product Type:

 Undecylenic Acid
 Sebacic Acid
 Castor Wax
 Dehydrated Castor Oil
 Others

Application:

 Lubricants
 Cosmetics & Pharmaceuticals
 Biodiesel
 Plastics & Resins
 Other

Key Regions Covered:

  North America
o UNITED STATES
o Canada
 Latin America
o Brazil
o Mexico
o Rest of Latin America
 Europe
o Germany
o United Kingdom
o France
o Spain
o Russia
o Rest of Europe
 Japan
 APEJ
o China
o India
o Malaysia
o Singapore
o Australia
o Rest of Asia Pacific Excluding Japan (APEJ)
 MEA
o GCC Countries
o Israel
o South Africa
o Middle East and Africa (MEA)

Frequently Asked Questions

What Castor Oil Derivatives Market growth drivers are thriving?

The application in bio-energy projects, as well as cleaning and storing dentures, are
influencing emerging trends.
What will be the Castor Oil Derivatives Market's CAGR between 2023 and 2033?

The market to continue to evolve at a 4.9% CAGR through 2033.

How huge may the market be in 2033?

The market to climb to US$ 2.21 billion by 2033.

What is the current Castor Oil Derivatives Market valuation?

The castor oil derivatives market is to be valued at US$ 1.37 billion in 2023.
What is the market share of the United States?

In 2023, the United States market may possess a market share of 10.3%.
How does the market in India expand?

Between 2023 and 2033, the Indian market is thought to strengthen at a CAGR of 5.9%.