Agarwood or Aquilaria is one type of fragrant tree. There is a huge demand for agarwood, especially its pieces & powder for making incense & the extracted oil of agarwood for making fragrant perfume, skincare & cosmetic products.

Agarwood is grown in the tropical rainforest of South Asia & since ancient times, agarwood, as a scent, was exported to Asia & the Middle East. Based on the grading, the price of each kg of essential oil made from Agarwood can be up to $30,000. The price of the pieces of Agarwood in kg is between $30 to $9,000. So why is Agarwood expensive?

Overview

Agarwood is being used for a long time. During 1400 B.C. in India, there was evidence of using Agarwood as perfume. In 65 B.C., Pedanius Dioscorides, the Greek physician, pharmacologist & botanist, discovered the usage of Agarwood in numerous areas of the medical field. Besides, the usage of Agarwood in China was known in 300 BC. During the reign of the Chinese Tang & Song, Agarwood was the most expensive exported material.

Agarwood is mainly grown in South Asia’s Himalayan foothills & tropical regions like southeast Asia & into the rainforests of Papua New Guinea. The bark of the Agar tree is thin & its outer part is rough. Besides, the wood of this tree is soft & white. This white agarwood is odorless & of no use.

Mainly, the real usefulness of agarwood is found immediately after the agarwood is affected by a special fungus “Phialophora Parasitica”. There are lots of perforations all over the agar tree after the four years of the plantation so that particular area can be affected by fungus.

Once infected, there is one type of extract exuded from the tree & later inside the tree, it gets dry & black in color. Usually, the dried black part is used as a fragrant wood. The infected black part is peeled off from the small pieces of wood (cut from the agar tree) after 2 to 3 years of perforation. This black part is the most expensive because the concentration of fragrance is the highest there.

On the other hand, the faded or white part has an insignificant concentration of fragrance. The grading of agar trees is done based on this concentration. The black part is fully peeled off from the agarwood to achieve the highest grading. The whole process of peeling is done by hand to make sure there is no other extra part in the black part. 

The peeled-off black part is boiled by keeping wet in the water. The valuable agar oil, through the distillation process, is prepared from this boiled wood. This oil is also called OUD OIL.  Later on, this oil is used for making perfume, soap, shampoo, cosmetics, skincare products & medicine as well. Besides, the pieces of agarwood are used at home, shrines & religious festivals as perfumes in Asia & Middle East regions. 

According to Business Insider, the price of each kg of agarwood is up to $100,000. On the other hand, one liter of the purest form of agar oil, appropriately distilled & aged, can cost up to $80,000. 

From 2005 to 2014, Indonesia, Malaysia & Thailand exported 6,760, 2,106, & 277 metric tons respectively. Despite its cultivation in India, agar trees as extinct species are banned for export. In 2020, the market size of agarwood was more than $126 million, which is estimated to increase by 23% every year till 2027. According to a report by Business Insider, in 2020, the global estimated value of agarwood pieces is $32 billion & by 2029, the value will be $64 billion.

Why Expensive?

Agarwood is also called the wood of the Gods. In the last 10 years of the international perfume industry, the demand for agarwood is increased due to the extensive use of its extract. The business of agarwood is centering its pieces of wood, powder & oil.

Production process

The reason for the expense of agar trees is its complex & time-consuming process. Previously the businessmen went to the forest to seek agar trees. They especially search fungus-infected agar trees, which are damaged by external forces ‘ants, or grazing wild animals. The perforation is taken place after the 3 years of cultivation of the agar tree so that that part can be infected by the fungus.

The agar tree yield is less due to its lengthy process of cultivation. Thus the production cost goes higher. Now, the perforation process is done by the drill machines & the infection process is done by injecting the liquid medicine. As a result, the whole process takes less time but still, it is not an automated process.

The quality of the agarwood is tested in a sawmill machine. Due to its softness, the agarwood is cut into pieces and the infected part is separated manually by expert labor. This is a time-consuming process & takes the involvement of a lot of people. 

However there is no official data but according to fpo junction, only in Asam, there are 50 thousand farmers & laborers directly involved with the agarwood business & approximately 150,000 people are indirectly involved in the fragrance industry.

Rarity

Another reason for the expense of agarwood is its rarity. The agar tree is marked as critically endangered due to its unsustainable production & poaching. In the last 150 years, according to IUCN, the population of agar trees is declined by 80%.

Besides, the frequency of fungus infection through natural phenomena is reduced. It is estimated that worldwide only 2% of agar tree is naturally infected for agarwood production. Some companies, as a part of the extensive supply of agarwood, have prepared their own gardens of it. But the cultivation of agar trees is limited because of its arduous & painstaking process.

Demand

As a fragrance, the demand for agar oil & pieces of agarwood is huge. There is growing popularity of agarwood essential oil as a raw material of perfume. In 2020, the value of the global perfume & perfume industry is more than $42 billion & by 2026, the digits will exceed $43 billion at an annual increment rate of 4.3%. 

Agar oil is also used in making skincare & cosmetics products like soap & shampoo besides its consumption in the perfume & fragrance industry. In religious festivals, shrines & homes, the usage of agarwood as a fragrance is noticeable. During meditation for relaxation, agarwood extract is used for removing tiresome, negativity & anxiety.

Also in the medical field, agar trees have discernible medicinal properties like the improvement of the digestive system, anti-inflammatory, antibacterial & skin-spot reducing agents. In the research of cell culture, it is known that wood oil can restrict the growth of MCF-7 breast cancer cells.