OUTLOOK '12: Dim light from candles for Asia paraffin wax market

10 January 2012 04:09  [Source: ICIS news]

By Heng Hui

SINGAPORE (ICIS)--Asia's paraffin wax market is not looking at a bright future this year, given strong availability of cheaper substitute raw materials in candle-making, market sources said.

Spot prices of paraffin wax have been largest stable in 2011 at above $1,500/tonne (€1,170/tonne) FOB (free on board) CMP (China Main Port) for the benchmark solid wax with melt points at 58/60 degrees Celsius, according to ICIS.

Prices rose to as high as around $1,650/tonne FOB China in March 2011 as candle manufacturing traditionally peaks towards the end of the first quarter, ICIS data showed.

Paraffin wax, which is derived from petroleum, however, is much more expensive than its substitutes such as palm wax, triple pressed stearic acid, tallow and soy wax.

Palm wax, the most popular substitute to paraffin wax is being offered at below $1,300/tonne FOB SE (southeast) Asia in end-December 2011.

Triple pressed stearic acid, meanwhile, was priced even lower at $1,170-1,200/tonne FOB SE Asia as at 4 January, according to ICIS.

Tallow and soy wax are also heard being used in wax blends in some industries.

But these substitutes to paraffin wax have limitations in their technical properties. Sellers acknowledged that natural wax would never replace petroleum-based wax altogether.

Waxes from natural sources are yellow and are incapable to hold colour and fragrance well, according to market participants. Some traders also said palm wax burns faster that it can only be a partial substitute for paraffin wax.

Tight supply of petroleum-based wax - caused by a gradual shift to higher viscosity base oils production in Asia – however, is keeping the spot prices steady despite weaker demand.

Slackwax is a by-product of Group I base oils production. It undergoes a de-oiling and bleaching process to become paraffin wax.

China’s paraffin wax capacity stands at around 1.5 m tonnes/year, accounting for around 70% of the total global wax production, according to market participants. Chinese producers of paraffin wax are PetroChina and Sinopec.

“Paraffin wax is a small market. Oil refineries do not really think of wax, but of the economic productivity of the wider base oils and lubricants markets when building new plants,” said a trader in Mandarin.

China, a major exporter of paraffin wax, is expected to ship out a smaller volume of less than 500,000 tonnes this year for the solid fully refined grades, market sources said. Official full-year 2011 data were not yet available. In 2010, the country exported 517,031 tonnes of the chemical, according to China Customs.

The country itself may be using up some of its paraffin wax output to make candles, which are then exported, some traders said. Candle exports enjoy a tax refund in China.

Liquid wax produced in China is usually priced lower than solid wax by around $100/tonne. But liquid wax prices declined further, widening the price gap with solid wax, given stiff competition posed by US wax producers.

In India, candles are mainly used for lighting and for religious observances. But with better and more stable electricity network in the country, there is less use for candles during power blackouts, according to participants based in the country.

The country procures from Iran about 90% of its wax import requirements, according to traders.

According to traders, Iran had been selling semi-refined or slackwax at cheap prices. Wax prices were assessed at around $1,150/tonne CFR (cost and freight) India on 4 January, according to ICIS.

($1 = €0.78)

Read John Richardson and Malini Hariharan's Asian Chemical Connections blog

By: Heng Hui
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