FocusAsia lauric acid rebounds; CPKO gains may push prices higher

24 February 2012 04:57 [Source: ICIS news]

By Wong Lei Lei

Lauric acids are used in the manufacture of alkyd resins, which have applications in paints and coatings. SINGAPORE (ICIS)--Lauric acid prices in Asia gained for the first time this year and look set to increase further in the near term as values of feedstock crude palm kernel oil (CPKO) are on an uptrend, market players said on Friday.

In the week ended 22 February, spot lauric acid prices rose $20-30/tonne (€15-23/tonne) to $1,300-1,350/tonne FOB (free on board) SE (southeast) Asia, after shedding 9% from the start of the year through mid-February because of weak demand, ICIS data showed.

Prices will likely be propped up in the coming weeks by rising feedstock costs although demand remains soft, market sources said. Lauric acids form the bulk of CPKO fractionation.

A number of prompt lauric acid producers are currently offering cargoes at $1,350-1,400/tonne FOB SE Asia, $50/tonne higher than their previous offers last week, market sources said.

CPKO March contract prices stood at $1,369/tonne FOB Malaysia at the close of trade on 22 February, up $64/tonne from the previous week.

“The increase in feedstock [prices] is too sudden, so although offers have been raised, buyers will need time to adjust,” an Indonesian producer said.

Given the sudden surge in lauric acid offers, many buyers became hesitant to commit to procuring volumes, market sources said.

“The buyers have not forgotten what happened in 2008 and are adopting a more cautious stance this time around,” a southeast Asian trader said.

More than three years ago – at the onset of the global credit crunch – commodities prices fell sharply, which left market players with high-priced cargoes in inventory.

CPKO prices are expected to continue rising, pulling along lauric acid prices, market sources said.

Lauric acids are used in the manufacture of alkyd resins, which have applications in paints and coatings.

Demand in the key China market has been slackening amid a domestic credit crunch and a slowing down of activities in the country’s construction sector, market sources said.

lauric acid price graph

($1 = €0.75)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Wong Lei Lei

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