25 June 2010 07:35 [Source: ICIS news]
By Serena Seng
SINGAPORE (ICIS news)--Asia mid-cut alcohol prices are expected to rise in July after a 18-month high this week on strong demand from industrial applications, though the uptrend may force some downstream producers to consider switching to synthetic alternatives, buyers said on Friday.
Prices of mid-cut, or C12-14 blended alcohol, settled at $1,800-1,850/tonne (€1458-1499/tonne) free on board (FOB) southeast (SE) Asia on 23 June, the highest price range seen since last week of March 2008, according to data from ICIS.
Alcohols - used in producing detergents, surfactants and in a variety of lubricating and cleaning industries - are made from the middle range of carbon chains from either natural (palm oil or coconut oil) or synthetic (ethylene) feedstocks.
“We are monitoring the prices at this moment and will not hesitate to switch to synthetic alcohols if price hikes become unacceptable,” said a buyer.
However, switching to synthetic alternatives would not be a popular option in the market as it would mean that buyers would have to re-assess their “product formulations”, he said but did not give details.
Switching to synthetic formulations could incur additional costs for the producers as they would have to prepare their facilities to non-plant origin feedstock, industry sources said.
“It is a different game altogether,” the buyer said, adding that most purchasers were currently adopting a “wait-and-see” approach as prices continued to rise.
Plant shutdowns and a shortage of the material from suppliers in the region would further tighten availability in July, adding pressure to prices of forward-month cargoes, buyers said.
“The situation is bad as sellers are sold out until early August at least,” another buyer added.
Material for prompt shipment was also in scarce supply, traders said.
Some traders said they believed that producers were raising mid-cut alcohol prices to cover the low margins they were getting from by-product refined glycerine, sources said.
Demand for refined glycerine was weak as most buyers had already covered their requirements for June and July, they added.
Producers, however, said they had increased mid-range alcohol values on strong demand and higher prices of feedstock crude palm kernel oil (CPKO) and crude coconut oil (CNO).
CPKO was last traded at $1,080/tonne FOB Malaysia for June contracts, up $61/tonne from the previous week, while CNO was settled at $1,040/tonne CIF (cost, insurance and freight) Rotterdam for July-August contracts, up $70/tonne week on week, according to prices assessed by ICIS on 23 June.
($1 = €0.81)
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