OUTLOOK ’12: Volatile feedstocks to affect Asia oleochem prices

03 January 2012 04:56  [Source: ICIS news]

By Wong Lei Lei

SINGAPORE (ICIS)--Asia’s oleochemical prices are likely to remain volatile in 2012 because of the unpredictable fluctuations in feedstock crude palm oil (CPO) and crude palm kernel oil (CPKO) prices and uncertain economic outlook, industry sources said.

Market players are wary of a full-blown debt crisis in Europe that could lead to a drastic decline in demand from the current largest export market for southeast Asian oleochemicals.

The main applications of oleochemicals are in surfactants, soaps, detergents, cosmetics and food emulsifiers.

Godrej International’s Dorab Mistry, who is considered a palm oil industry guru, was quoted in the media forecasting that CPO prices will steadily rise up to June 2012 given expectations of a reduced harvest.

Goldrej International is a unit of Indian conglomerate Godrej Group, which has businesses in real estate and industrial engineering, among others.

Mistry’s views are in stark contrast with the forecast of James Fry from consultancy firm LMC International that CPO prices will fall in line with the slowing down of the global economy.

Fatty alcohol prices fell for most of 2011 and were at $2,100-2,150/tonne (€1,617-1,656/tonne) FOB (free on board) southeast Asia on 28 December 2011, ICIS data showed.

Fatty alcohol prices are expected to remain vulnerable to the fluctuations in feedstock prices, market sources said.

However, producers have expressed interest in raising mid-cut prices to above $2,200/tonne FOB SE Asia this year, because of rising feedstock costs.

Main feedstock CPKO contract prices rose to the highest level seen since July 2011 on 29 December, with the local DEL (delivered) price exceeding Malaysian ringgit (M$) 4,400/tonne DEL ($1,388/tonne), according to the MPOB (Malaysian Palm Oil Board).

In the lauric and myristic acid markets, a supply-demand imbalance has existed since the start of 2011 – a situation that may persist in the near term, market sources said.

Lauric and myristic acid is generated at a ratio of 3:1 during the fractionation of CPKO or crude coconut oil (CNO).

With lauric acid supply far exceeding demand in the market, most producers are reluctant to produce this pair of acid, leading to tight myristic supply.

Myristic acid is mainly used in the personal care sectors. It is difficult to find a suitable replacement for this chemical, industry sources said.

Prices in the spot market reflected the imbalance, with myristic spot cargoes costing as much as three times that of lauric.

The spot prices of myristic acid rose to above $4,000/tonne FOB southeast Asia towards the end of 2011, while lauric acids were trading at the $1,300s/tonne FOB southeast Asia in December 2011, according to ICIS.

On the glycerine front, demand is expected to strengthen once Solvay’s epichlorohydrin (ECH) plant in Thailand is started up in the first quarter of 2012.

The ECH plant is expected to consume about 9,000 tonnes/month of refined glycerine, when running at full capacity.

Refined glycerine prices were supported by tight supply in the fourth quarter of 2011. The tight supply situation is expected to ease in late February this year, when biodiesel producers in the region will ramp up production and the glycerine sector is in its lull demand season, industry sources said.

Glycerine demand typically peaks in the third quarter of the year as the production of moisturisers – a major end-product of the chemical – ramps up in anticipation of the winter season, before tapering off in the first quarter.

For soap noodles, another product derived from CPO and other derivatives, demand prospects are good from Africa, producers said.

Palm plantations that are being developed in Africa are currently at their infancy stage and are unlikely to boost supply for the whole of 2012.



($1 = €0.77, $1 = M$3.17)

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By: Wong Lei Lei

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