Falling glycerine squeezes Asia fatty acid margins

04 June 2008 11:23  [Source: ICIS news]

SINGAPORE (ICIS news)--Falling co-product glycerine values are squeezing the margins of most Asian oleochemical manufacturers, producers said on Wednesday.

 

“Now that glycerine has come down, by right, [fatty] acid prices should be increased,” one Malaysia-based seller said, although he added that stagnating demand and strong competition has made it difficult to increase their prices, resulting in squeezed margins.

 

Ample glycerine supply and lacklustre demand has kept downward pressure on prices, with offers reported at $1,500-1,600/tonne FOB (free on board) SE Asia (southeast Asia) finding few takers.

 

“We have to drop our [glycerine] prices if we are unable to sell cargoes,” the marketing official of a southeast Asian fatty acid plant said, as inventory pressure built up.

 

Glycerine, a by-product of fatty acid production, has been the silver lining of the oleochemical industry, as prices tripled over the past year.

 

The boom in glycerine prices meant that oleochemical manufacturers could afford to narrow the spread between raw material and end-product fatty acid prices, due to the high margins from co-product sales.

 

But with co-product glycerine prices falling rapidly, and fatty acid margins not rising in tandem, manufacturers are finding themselves in an increasingly unenviable position.

 

Major fatty acid producers in Asia include IOI Oleochemical, Kuala Lumpur Kepong, Musim Mas, Natural Oleochemicals and Cognis Oleochemicals.

 

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By: Jeremiah Chan
+65 6780 4359

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