20 April 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--The majority of European mid-cut fatty alcohol second-quarter contracts have settled between €2,600–2,800/tonne ($3,714–4,000/tonne), up by €400/tonne from the previous quarter, buyers and sellers said on Wednesday.
The contract prices, which were settled on a free delivered (FD) northwest Europe (NWE) basis, are now at a record high for European material.
However, many buyers said they were reluctant to settle quarterly contracts and instead opted to cover themselves on a monthly basis.
The record-high prices in Europe have primarily been driven by the rising cost of the feedstock crude palm oil (CPO) during the first quarter of this year.
Bursa Malaysia CPO reached an all-time high of Malaysian ringgit (M$) 3,643/tonne ($1,202/tonne) during the week ending 11 March.
However, news of increased production in Malaysia, the major source of the feedstock for Europe, has since resulted in lower prices.
Although prices of the feedstock have decreased, trading this week at M$3,310/tonne, prices of the mid-cut fatty alcohols have stayed at high levels.
“A significant number 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,” a trader said.
One producer said that more CPO output in Malaysia would do nothing to alleviate the upward pressure on the European market, as CPO levels in Malaysia were previously much lower than usual.
“The spike merely brings production of the feedstock back up to normal levels,” he said.
Prices of mid-cut material for the first quarter settled between €2,200–2,400/tonne FD NWE. Many buyers described the €400/tonne quarterly increase as unsustainable.
Prices for short-chain material for the second quarter were heard between €1,500–1,700/tonne FD NWE, while long-chain material was between €1,600–1,800/tonne FD NWE.
With demand still considered strong for all grades of fatty alcohols, traders said they do not expect to see any downward movement in prices in the near future.
($1 = €0.70, $1 = M$3.03)
Read Paul Hodges’ Chemicals and the Economy blog
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