20 May 2010 23:13 [Source: ICIS news]
HOUSTON (ICIS news)--US tall oil fatty acid (TOFA) supplies are tightening due to increased demand stemming from surfactant use in the BP oil spill in the Gulf of Mexico, buyers said on Thursday.
The spill was using less TOFA when compared with tallow and vegetable-based C18:1, buyers said.
But a surfactant-maker with a specific product line based on TOFA has been recently added to other suppliers included in sourcing oleic-related product to the oil spill, according to market participants.
US tallow-based fatty acid and TOFA inventories move in routinely monthly contracted volumes with little price volatility and relatively small spot business, sources said.
TOFA price reaction thus far was following a pattern similar to that of tallow-based oleic, whereby material headed for use in the Gulf could command a wide price variation from contracted or typical spot business due to the emergency nature of the event.
Buyers said contract prices for 5% rosin quality TOFA, the lowest quality, ranged from the high-40s cents/lb to the low-50s cents/lb in May.
Top-grade 1% material ranged about the same, according to TOFA buyers.
TOFA feedstock crude tall oil (CTO), a by-product of the paper pulping process, was described in short supply, putting a crunch on TOFA stocks before the oil spill, sources said.
Buyers said TOFA suppliers were aiming at higher prices in June, with at least one 3 cent/lb ($66/tonne, €53/tonne) 1 June increase announced and several July initiatives under consideration.
Several fatty acid buyers and sellers considered surfactant demand from the oil spill would be short lived, perhaps 3-4 weeks, while others were securing additional inventory through July.
TOFAs are a group of rosin (pine oil) based fatty acids that provide similar characteristics as C18:1 oleic acid, such as being a liquid at room temperature.
Emulsifiers, particularly in the drilling sector, are a large end-use segment for TOFAs. Other end uses include adhesives and inks.
Tall oil fatty acid producers and suppliers include MeadWestvaco, Georgia Pacific and Arizona Chemical, among others.
Tallow and vegetable fatty acid producers include Procter & Gamble, Vantage Oleochemical and Cognis, among others.
The oil spill occurred after the 20 April explosion of the BP-operated Deepwater Horizon rig drilling in the Gulf of Mexico approximately 45-miles off the coast of Louisiana.
($1 = €0.81)
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