X. Essential oils

1. Product description
2. Trade
3. Prices
4. Trade structure
5. Individual products' profiles
6. Prospects

1. Product description

Essential oils are odorous products obtained from natural raw materials such as leaves, fruits, roots and wood of many seasonal or perennial plants. They are generally of complex composition and contain alcohols, aldehydes, ketones, phenols, esters, ethers, and turpenes in varying proportions. An estimated 3,000 essential oils are known of which approximately 300 are of commercial importance. The majority of them are obtained from agricultural plants, but some 26 essential oils are collected in commercial quantities from wild sources (Table 8).

On account of their aroma and highly volatile nature, essential oils have been traditionally used as basic raw materials in perfumes and flavouring. They are used in the preparation of beverages, medicines, and personal care and household products such as cosmetics, toiletries and cleaning preparations. They are also used in antiseptics, deodorants, disinfectants and in flavouring of foods and beverages.

2. Trade

During the period 1987-1991, imports increased from US$ 838 million in 1987 to over US$ 1 billion in 1990, but decreased to US$ 984 million in 1991, due to Gulf War (ITC, 1993b). Although 1992 trade statistics for essential oils is not yet complete, available information indicates an upward trend. A word of caution, however, may be added that the available data are for all the essential oils, obtained from both the cultivated as well as wild sources.

The EC, USA and Japan were the principal import markets of essential oils during the period 1987-1991, accounting for 72% of the total world imports. Other important markets include EFTA, Hong Kong, Brazil, ASEAN, Republic of Korea, Canada, Australia and India.

3. Prices

Current market information on essential oils is regularly published in the Public Ledger, Chemical Marketing Reporter and Cosmetic World News. The Economic and Social Commission for Asia and the Pacific (UN/ESCAP) also supplies price information on essential oils. A time series data covering price information of important essential oils in three major markets, namely, EC, USA and Japan has recently been published by ITC for the period 1988 to 1992 (ITC, 1993b).

Table 8. List of essential oils obtained from wild or cultivated plants of forest origin.

Source: ITC (1986a)

4. Trade structure

4.1. Legislative aspects

World trade structure for essential oils and oleoresins is described in the ITC market study on essential oils and oleoresins published in 1986. Dealers/merchants purchase the products in producing countries from the producers/collectors and export them to the processing or compounding houses or sometimes directly to the end-product manufacturers in importing countries. From the processing or compounding houses the products reach finally to the end-product manufacturers. The number of intermediaries is declining and their is an increase in direct trading between the producers or exporters and processors or end-users. Also, some countries such as Singapore, Hong Kong and the Netherlands regularly import more than they consume and conduct re-export trade with or without processing. For most essential oils, trading may take place on the futures or spot market.

4.1. Legislative aspects

Numerous bodies exist which monitor product quality and trading procedures and draw up specifications for individual products. The most widely recognised standards for essential oils and spices are those set by International Organization for Standards (ISO). The standards have also been established by various national pharmacopoeias. The general interests of traders and users are served by trade associations such as Flavour and Extract Manufacturers Association (FEMA) in the USA. International Federation of Essential oils and Aroma Traders (IFEAT), based in Geneva, monitors toxicological and other hazardous aspects of various raw materials used in perfume compounds.

5. Individual products' profiles

5.1. Sandal oil
5.2. Eucalyptus oil

As time does not permit to discuss a profile of all the 26 products indicated in Table 8, only two of them, namely, sandalwood and eucalyptus oils will be discussed over here.

5.1. Sandal oil

Sandalwood oil is steam distilled from coarsely powdered wood and roots of Santalum album, a small tree indigenous to India, Sri Lanka, Indonesia and surrounding islands. It is one of the oldest known perfume material with a history of over 4,000 years (Gupta and Guleria, 1980). Sandalwood oil is widely used in western as well as oriental perfumery. India and Malaysia are the main producers. Annual production is estimated between 200 to 300 tonnes per year (ITC, 1986). India alone produces about 150 tonnes of sandalwood oil annually, but the bulk of it is consumed domestically. India exported 37.43 tonnes (@ of Rs. 3,547.25 per kg; fob) and 64.61 tonnes (@ Rs. 2,512.07 per kg; fob) in 1991 and 1992, respectively.

Indonesia, on the other hand, exported the bulk of its production, averaging 21 tonnes per year from 1984 to 1988; export during 1988 being 19.40 tonnes @ US$ 141.61 per kg (fate) (Menon, 1989). Current prices of East Indian Sandalwood range between US$ 185 to 200 per kg (cif) ¹

¹ The Public Ledger, July 7, 1993.

The United States is the largest importer of sandalwood oil, taking an annual average of 25-30 tonnes. Western Europe is also a significant importer and there are substantial markets in Asia.

With the release of a synthetic substitute of sandalwood oil in 1970s under the trade name "Sandala", natural oil lost its market in low-priced and utility formulations, but it still holds its market in high grade perfumery.

5.2. Eucalyptus oil

Although about 300 species of Eucalyptus have been shown to contain volatile oils in their leaves, only a few are important as far as commercial production of essential oils is concerned. The oils of these species are classified in trade in three broad types according to their composition and main end-use: medicinal (cineole-rich), perfumery (citrinellal) and industrial (rich in phellandrene and piperitone). The distinction is not hard and fast and all the three types of oils, for example, could be used in perfumery.

Yearly world production of all types of eucalyptus oils is estimated to be 5,000 tonnes, of which about 63 percent is medicinal oil, 33 percent is perfumery oil, and 4 percent is industrial oil. World production and trade is dominated by the People's Republic of China, where eucalyptus has been planted over an area of 670,000 ha. It produces, on an average, 3,000 tonnes of eucalyptus oil per year, which is 65 to 75 percent of global production. Chinese exports, mainly to France and Germany, range between 1,600 to 2,000 tonnes annually and account for at least 70 percent of world trade (Kunshan, 1991; Coppen and Hone, 1992). Portugal, India, South Africa, Australia, Swaziland, Chile and Spain are other eucalyptus oil producing and exporting countries.

Current market price for Chinese eucalyptus oil are US$ US$ 3.00 per kg (cif) ² as compared to US$ 5.10 per kg during 1991 and US$ 9.50 during 1988 (Copper and Hone, 1992). The price depression is due to over supply and stock build-up.

² The Public Ledger, Wednesday July 7, 1993

6. Prospects

With the increasing trend for preference of natural products, demand for natural fragrances and flavourings continues to grow, despite the fact that a considerable part of market is being currently shared by synthetic substitutes. These substitutes have advantages of lower production costs, stable pricing and regular supply. In view of the growing pressure faced by many natural essential oils from cheaper synthetics, importance of maintaining regularity of supplies and quality can hardly be over emphasised.