High fatty alcohol prices could inhibit market growth – consumers

14 April 2010 17:55  [Source: ICIS news]

LONDON (ICIS news)--The recovery and growth of the European fatty alcohols market risks being severely impaired if prices are maintained at current levels, consumers warned on Wednesday.

The majority of third quarter contracts for mid-cut alcohols (C12-14) were settled in the range of €1,350-1,450/tonne ($1,824-1,959) FD (free delivered) NWE (northwest Europe), up €280-300/tonne from the first quarter.

However consumers said these price levels were prohibitively high and many indicated they had not secured their full volume requirements for the quarter as a result.

Although demand had increased during the first quarter, it would not continue to do so with such unaffordable prices, they said.

Downstream industries would not accept such price rises, consumers warned, and would not hesitate to switch to synthetic alternatives.

“I will walk from the market [if prices did not come down]. I will substitute my oleochemical feedstocks [for synthetic],” said one consumer.

When asked if consumption was on track to match pre-recession levels, the same source replied; “not with these prices.”

The high prices were primarily the result of extremely tight availability; something many buyers considered to be intentionally imposed on the market by producers, with one even likening the situation to blackmail.

“There is plenty of oil, enough capacity...they are withholding volumes,” said one buyer.

Producers countered by laying the blame with the high cost of raw materials, pushed up by speculation trading. However buyers disagreed and said the price increases had been disproportionate. 

Some consumers were hopeful that costs would decrease in the coming weeks. While contract details were not divulged, it was indicated that many were based on volume, not time, and so were unlikely to last the duration of the quarter. This gave hope that remaining volumes could be purchased at a later date at more affordable prices.

($1 = €0.74)

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By: Ross Yeo
+44 208 652 3214

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