Europe Q4 mid-cut fatty alcohol contracts settle at record highs

13 October 2010 17:24  [Source: ICIS news]

LONDON (ICIS)--European fourth quarter contracts for mid-cut natural fatty alcohols have settled at record highs in the range €1,800-1,980/tonne ($2,500-2,750/tonne), an increase of €140-230/tonne, sources said on Wednesday.

The increase in the contracts, which were settled on a free delivered (FD) northwest European (NWE) basis, was primarily due to extremely short availability and was exacerbated by high feedstock palm kernel oil (PKO) costs.

Furthermore, the wide spread of the range highlighted the fact that values were still moving upwards. Those contracts at the lower end of the range were settled early back in the first half of September, with the high end of the range representing the most recent settlements, sources said.

“You’re lucky if you’ve settled any contracts, there’s just nothing available,” said a buyer, adding; “before mid-September you could get prices below €1,900/tonne; today we’re beyond €2,000/tonne for spot. In my recollection, these are the highest ever prices.”

The market had been tight approaching the end of the third quarter, which sources attributed to high demand, increased consumption from integrated producer/consumers, and production turnarounds.

Additionally, it was suggested that the threat of anti-dumping action by the European Commission against various Asian countries may have resulted in a cautious attitude from Asian exporters and a consequent reduction in supplies arriving in Europe.

The supply situation worsened further when Indonesian producer Musim Mas shut its 120,000 tonne/year alcohols plant at Medan, in Indonesia, after it suffered damage during the week ending 12 September.

This coincided with the beginning of negotiations for fourth quarter contracts, and some buyers said they had been lucky enough to obtain price agreements before the outage, after which prices began moving up sharply.

Further upward pressure was added by sharply increasing PKO prices, although sources stressed that this was secondary to the tightness.

“We had similar PKO prices two years ago, but alcohol prices weren’t this high. There is a huge premium because of the tightness,” said the buyer.

Many buyers were relatively indifferent to the high prices and were more concerned with the limited availability, explaining that the extra costs were generally passed onto their customers, whereas the amount of fatty alcohols they could buy determined the amount of business they could do.

“The cost of PKO doesn’t help, but the discussions we are having are around availability, not costs. If I could buy more, I would,” said another buyer.

($1 = €0.72)

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By: Ross Yeo
+44 208 652 3214



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