18 January 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--European palm stearic fatty acids contract prices for the first quarter have increased from fourth-quarter 2011 levels, following a surge in raw material costs towards the end of last year, market participants said on Wednesday.
Palm stearic acid settled in a range of €1,000–1,100/tonne ($1,266–1,392/tonne) FD (free delivered) NWE (northwest Europe) – an increase of €50/tonne on the low side and €100/tonne on the high side from the fourth quarter.
With the vast majority of market players now thought to have settled their contracts for the first quarter, many attributed the increase in palm stearic acids to the sharp rise in palm kernel oil costs, owing to heavy rainfall in southeast Asia in recent months.
Feedstock crude palm kernel oil prices were trading at around $1,200/tonne (€948/tonne) FOB (free on board) Malaysia for most of December, but hit $1,412/tonne FOB Malaysia on 4 January because of tight supplies arising from lower harvest yields in the current monsoon season.
Although there is usually a time lag in the effects of Asia-Pacific weather conditions on the prices of material on offer within Europe, participants that settled first-quarter contracts during the latter part of 2011 were able to secure discounts compared with those that settled after the monsoon.
However, one buyer that settled its contract this week believes that it is pure “market speculation” dictating the price rises seen at present.
“It’s far too soon for price rises to be witnessed in Europe,” the buyer said.
Tallow stearic acids also marked an increase from fourth-quarter levels, settling between €1,000–1,150/tonne FD NWE – an increase of €40/tonne on the low side and €50/tonne on the high side.
Although reduced demand from the biodiesel sector has seen lower raw tallow feedstock costs of late, sources believe the increases in tallow stearic fatty acids are a result of the upward pressure from its palm-based counterpart.
The raw tallow price decrease is said to be more pronounced for lower-quality material.
“The spread between low- and high-quality tallow is now more than €100/tonne, compared with the usual €20/tonne ... This could lead to increased variation in derivative pricing in the future,” one producer said.
In contrast, oleic prices marked a decrease from fourth-quarter 2011 prices.
Palm oleic acids settled in a range of €1,050–1,150/tonne FD NWE – a fall of €50/tonne. Tallow oleic acids settled in a range of €1,050–1,250/tonne FD NWE, a drop of €100/tonne on the low side and €50/tonne on the high side.
Although all palm-based feedstocks increased in price, market players noted that palm olein – a key feedstock for palm-based oleic acids – had not increased as rapidly in value as palm kernel oil, allowing consumers to push for price decreases.
The price decrease in palm oleic products was also thought to be adding to the downward pressure on tallow oleic acids, which marked similar decreases.
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