Musim Mas' Indonesia fatty alcohol outage to pressure Europe prices

22 September 2010 16:10  [Source: ICIS news]

LONDON (ICIS)--Musim Mas has shut its fatty alcohols unit in Medan, Indonesia, for four to six months after it suffered damage during the weekend ending 12 September, putting upward pressure on Europe prices, market sources said on Wednesday.

The Indonesian producer could not be reached for comment, but customers said it had indicated that it hoped to resume production by the second quarter of 2011.

The damage reportedly affected the hydrogenation unit of the 120,000 tonne/year plant. This capacity translates to approximately 75,000 tonne/year of mid-cut alcohols, of which around 25,000 tonne/year would be designated for Europe, sources said.

Several market sources suggested the damage had been caused by a fire or explosion but this has not been confirmed.

It was estimated that the outage could represent a loss of around 10,000 tonnes of mid-cuts from the Europe market. While this in itself would not normally drastically tighten the market, sources said, it came at time when supplies were already short and would, therefore, have a significant effect on prices.

The outage also happened just when fourth quarter contracts were due to be negotiated and would undoubtedly increase price ideas, sources said.

“Before I was thinking around €1,800/tonne ($2,400/tonne) ex tank [for fourth quarter mid-cut contracts], but now? Who knows,” said a producer.

Other sources agreed that contract prices would now be settled at higher levels than were being discussed prior to the incident.

A trader suggested prices around €1,900/tonne while a buyer was more pessimistic at €1,950-2,000/tonne. These compare with a range of €1,660-1,750/tonne FD (free delivered) NWE (northwest Europe) in the third quarter.

However, while the producer above acknowledged that buyers would probably accept virtually any price offered, in light of the tightness, he warned that excessively high prices would damage the market.

“You have to be reasonable though. What is a fair number? If you kill your customer, you’re gone.”

($1 = €0.75)

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By: Ross Yeo
+44 208 652 3214

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