Global demand lifts mentha oil prices; outlook bullish

By Manoj Kumar Jain

Mentha is an aromatic herb, which also goes by the name ‘Japanese pudina’ in India. Mentha oil prices have always been quite volatile.

In the last few years, India has emerged as an export hub for mentha oil and its derivatives. The country contributes around 80 per cent to the total global mentha oil production. Total global production stood at around 48,000 tonnes, out of which Indian production varied between 30,000 and 40,000 tonnes.

As per estimates, mentha oil production in India for crop year 2016-17 will be around 38,000 tonnes.

Apart from India, China contributes around 9 per cent, Brazil 7 per cent and the US 4 per cent to the total production.

Mentha oil sowing is done during February to March and harvesting is done from May to June.

In India, mentha oil is mainly produced in Barabanki, Sambhal and Chandausi.

As per the report “Essential Oil – Global Industry Perspective, Comprehensive Analysis and Forecast, 2014-2020,” the global demand of essential oil will increase in the coming years.

Global essential oil market is mainly driven by increasing demand from natural and organic care products. This will boost Mentha oil demand in the coming years, mainly from medicines, health products, cosmetics as well as food and beverages, among others.

Demand will emerge from the European Union, the UK, Japan, the UK, China and Singapore.

In the last two years, mentha oil is trading in a range, but in last two months, the commodity has outperformed due to increasing global demand.

At present, mentha oil is trading around Rs 1,144 per kg level. Positive fundamentals and increased demand outlook is favouring the commodity prices. In our view the bull run in the commodity will continue in the coming days and price could head towards Rs 1,250 levels.

Technical View
In recent times, mentha oil prices have shown strength, as they have surged more than 20 per cent in last two months.

Technically, mentha oil has given long term price breakout on weekly chart at around Rs 1,144. If the prices sustain above this level, then it could further move till Rs 1,245-50 zones.

Mentha oil is having strong support at around Rs 1,100 mark.

Investors can buy and accumulate menths oil at every price dip for the upside target of Rs 1,200-1,250, with a strict stop loss below Rs 1,100 on a closing basis.



Recommendation:
Buy Mentha oil: Rs 1,236-1,244 | Stop Loss Rs 1,098 | Target Rs 1,200-1,250.

(Manoj Kumar Jain is Director of Commodity and Currency at IndiaNivesh Commodities. He has 20 years of experience in financial service sector. Views expressed in this article are author's own and do not represent those of ETMarkets.com. Readers are advised to consult their financial advisers before taking any position based on these observations)