07 September 2011 17:25 [Source: ICIS news]
LONDON (ICIS)--European fatty alcohol producers are fearful over their prospects for the remainder of the year as a result of cheap mid-cut material on offer from producers in the Asia-Pacific region, several producers said on Wednesday.
With ample supply of mid-cut material, and demand currently at low levels in southeast Asia, sources have seen increased numbers of producers there looking to import material into Europe.
“We are offering mid-cuts for €1,900/tonne ($2,639/tonne) free delivered (FD) northwest Europe (NWE), but are hearing prices in the market at around €1,700/tonne FD NWE from producers in southeast Asia,” said one European producer.
Feedstock prices have declined significantly since earlier in the year, placing strong downwards pressure on the ultimate cost of fatty alcohols.
Bursa Malaysia crude palm oil, a key feedstock used in fatty alcohol production, this week traded at ringgit (M$) 3,140/tonne ($1,054/tonne, €753/tonne), having reached a high of M$3,643/tonne during the week ending on 11 March.
As a result of falling feedstock prices, the majority of European mid-cut fatty alcohol contract prices for the third quarter settled at €2,350–2,600/tonne FD NWE, down by €200–250/tonne FD NWE from the record highs reached during the previous quarter.
Although prices of mid-cuts on offer in Europe have declined further since then, European producers maintain that they are unable to offer material as low as competitors in southeast Asia.
“We are losing out on our customer base, they are having their heads turned by these lower offers,” said another producer.
“Those producers who have not been affected by the provisional antidumping duties have the flexibility to offer fatty alcohols to Europe at significantly lower levels than we can afford to,” the producer added.
With widespread macroeconomic concerns seeping into the market, uncertainty over future demand continues to affect consumer habits, with many buyers purchasing material on a hand-to-mouth basis.
“I am reluctant to continue purchasing fatty alcohols on a quarterly contract when there is so much availability of material and a possibility of further decline to prices,” one buyer said.
Although buyers are hopeful of further price decreases, the majority of market participants remain unsure whether prices will be able to be sustained at this level over the longer term.
“European producers remain anxious over profit margins. If this situation persists we may have no choice but to slow down our production levels or halt output altogether,” one player said.
($1 = €0.72, $1 = M$2.98, €1 = M$4.17)
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