Oleochemicals sales capped by CPO fall

29 October 2008 05:14  [Source: ICIS news]

SINGAPORE (ICIS news)—Demand for Asian oleochemicals, such as glycerine and fractionated fatty acids, has dried up in the face of rapidly falling crude palm oil (CPO) prices and concerns regarding the global financial meltdown, traders and producers said on Wednesday.


“I used to move three to four containers of oleic acid every week, but now I can’t even sell one,” he said, adding that what the upstream CPO feedstock market needed some stability in pricing before demand could return.


CPO futures on Bursa Malaysia have crashed in recent weeks, with the benchmark third month delivery contract falling from a peak of ringgit (M$) 4,416/tonne ($1,244/tonne) earlier in March to around M$1,416/tonne on Wednesday - a drop by almost 70% in just seven months. 


“Everything is very slow right now,” a Malaysian fatty acid seller concurred, pointing out that fatty acid fractionation rates had slowed down in recent weeks as buying sentiment skidded to a halt as a result of the low CPO prices.


Sellers who had sold forward parcels found their customers defaulting on their contracts fixed earlier, or choosing to defer their delivery, as downstream demand slowed to a halt, sellers said.


Earlier speculation that the plunging CPO feedstock prices could help to increase  fatty acid sales margins  were dashed, as sellers quickly found that buyers retreated to the sidelines in expectations of further price cuts.


“I think this is the worst period many of us have seen in our careers - glycerine is dropping , raw material keeps coming down, the economy is bad,” the senior marketing official of a Malaysian oleochemical major said.


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




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By: Jeremiah Chan
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