Europe Q2 fatty alcohol negotiations stall on softening feedstock

17 March 2011 13:50  [Source: ICIS news]

LONDON (ICIS)--The majority of European fatty alcohols buyers are holding out on contract negotiations for the second quarter in the hope that prices of all grades of the material will mark a decrease in line with softening feedstock values, a trader said on Thursday.

Crude palm oil (CPO), a key feedstock of fatty alcohols, has declined in value in recent weeks with values for April contracts traded at Malaysian ringgit (M$) 3,400/tonne ($1,115/€796 per tonne) on Thursday, down M$420/tonne month on month.

News of a production spike in Malaysia, the major suppliers of the feedstock to Europe, has added further to the downwards pressure.

“Interest among European consumers is strong, but with prices for all grades of fatty alcohols maintaining elevated levels, buyers are demonstrating reluctance towards settling their contracts for Q2,” the trader said.

“The majority of consumers still prefer to operate on a spot basis as they believe prices of fatty alcohols will soon drop to take into account the lower feedstock values,” he added.

Prices for mid-cut material were quoted between €2,700-2,800/tonne FD (free delivered) NWE (northwest Europe) in the week ending 18 March. Buyers described these levels as unsustainable in the long term.

Mid-cut material for the first quarter was settled between €2,200-2,400/tonne FD NWE.

“We are unable to purchase stock at these levels and maintain reasonable profit margins,” one buyer said.  

Another buyer felt uncertain that fatty alcohols would maintain these high levels for much longer and was delaying settling his contract negotiations for the second quarter as a result.

($1 = M$3.05, €0.72)

Additional reporting by Serena Seng

By: Neha Popat
+44 208 652 3214

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