US Q3 fatty alcohol prices pressured higher by tight supply

16 June 2010 21:45  [Source: ICIS news]

HOUSTON (ICIS news)--US fatty alcohol prices are being pressured up going into third-quarter contract negotiations as narrow supply dominates the market, buyers and sellers said on Wednesday.

No formal price announcements had been made. Buyers and importer-sellers said none were likely to emerge because sellers were developing a preference for going to each account individually for negotiations.

Second-quarter contract prices for short-chain C8-10 natural and C8-11 natural and synthetic alcohols ranged 90-100 cents/lb ($1,984-2,205/tonne, €1,607-1,786/tonne), while C12-14 to C12-16 detergent range alcohol contracts were in a 72-79 cents/lb spread, according to ICIS pricing.

Market participants said third-quarter short-chain alcohol prices were being discussed above 100 cents/lb, with mid-cuts headed toward the same level.

The supply crunch hit first in the detergent-range alcohols, sources said.  

The mid-cut alcohols serve the biggest demand segment for fatty alcohols ,with primary applications in home and industrial surfactants (surface-acting agents).

The mid-cuts developed an unusually brisk spot market during the second-quarter, the sources said.

Spot prices for mid-cuts hit the mid-to-upper 80s cents/lb in late April, moving into the high-80s and low-90s cents/lb by June, market participants said.

Buyers said they purchased carefully in the first and second quarters this year due to uncertainties in the recovering US economy.

US detergent demand swelled late in the first quarter and continued to gain strength in the second quarter as well, buyers said.

Similar demand improvements were seen in the other alcohol tiers, resulting in a clamour for material by the middle of the second quarter, according to sources.

The bulk of US fatty alcohol supply is sourced from Asia, as the US is a net importer of these materials.

Palm oil market fluctuations in Asia and production choices made by Asian alcohol suppliers also played a role in the supply crunch, sources said.

Asian producers began to choose to maximise margins through the oil market and not take the material to alcohol production, importers said.

That strategy had become more prevalent and was a factor in the US short supply condition, market participants said.

Additionally, Asian fatty alcohol producers awere increasingly able to move material into alternative markets – such as China – reducing the need to export to North America, sources said.

Domestic US natural fatty alcohol producers include Procter & Gamble and Cognis. Shell Chemical and Sasol are domestic synthetic producers.

Fatty alcohol importers include Kao of Japan, Ecogreen and KLK.

Procter & Gamble is a multi-national company and is the largest global fatty alcohol producer, with facilities in Asia and the US.

($1 = €0.81)

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By: Judith Taylor
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