Strong Europe demand tightens oleic fatty acids, drives up prices

07 April 2010 17:40  [Source: ICIS news]

LONDON (ICIS news)--Strong demand in Europe for fatty acids, particularly oleic acid, has resulted in an extremely tight market and accordingly high contract prices, sources said on Wednesday.

Although a handful or parties were yet to settle second quarter contracts, values for tallow based oleic acid were generally around €950-1,000/tonne ($1,273-1,340/tonne) FD (free delivered) NWE (northwest Europe), up €90-100/tonne from the first quarter.

An even sharper increase was seen for palm based material, with prices at €1,000-1,150/tonne, up €150-250/tonne, according to global chemical market intelligence service ICIS pricing.

While raw material prices and the poor euro/dollar exchange rate were contributing factors, sources said the primary price driver was increased consumption and the difficulty in securing the limited volumes available.

“I’ve seen a 20-30% increase in consumption compared with two years ago...we’re above pre-recession levels. I’m running my plants flat out,” one producer said.

Rather than originating from a particular downstream industry, sources said demand was improving across the board.

Several producers said tightness was so severe they had concerns over being able to meet contractual obligations, let alone being able to offer material on the spot market.

The short supply caused by high demand had been compounded by major delays in the arrival of vessels bringing palm material from Asia, sources added.

Because many consumers were flexible with regards to palm or tallow based material, tighter supply and higher prices in the palm market had soon spread to the tallow market, they said.

While poor availability was currently a problem for all fatty acids, the strain was felt especially in the oleic acid market due to its traditionally smaller size and limited inventories, traders and producers said.

($1 = €0.75)

For more on fatty acids  visit ICIS chemical intelligence 
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By: Ross Yeo
+44 208 652 3214

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