FocusAsia soap noodle prices to remain firm on high feedstock costs

03 May 2012 05:46  [Source: ICIS news]

By Andrea Heng

AsiaSINGAPORE (ICIS)--Asia’s soap noodles prices are expected to remain firm because of rising feedstock costs, but demand at the higher prices continues to be slow, market sources said on Thursday.

The prices of 80/20 soap noodles were assessed as up by $30/tonne at the high end of the range at $1,190-1,270/tonne FOB SE Asia during the week ended 27 April, according to ICIS.

Offers of the 80/20 blend of soap noodles, which is the standard and most actively traded grade in the market, were heard $30/tonne (€23/tonne) higher week on week at $1,250-1,270/tonne FOB (free on board) southeast (SE) Asia during the week ended 27 April.

However, customers adopted a cautious stance so their buying ideas hovered at around the high $1,100s/tonne FOB SE Asia.

“Suppliers have no choice but to offer product at higher prices because of the surging costs in the feedstock palm stearin and palm fatty acid distillate (PFAD) markets,” a southeast Asian producer said.

Sellers were in no hurry to offload their material and said they are unable to match bids at below $1,200/tonne FOB SE Asia.

However, a second southeast Asia-based producer said: “Buyers are also not interested in committing to fresh purchases because they expect prices to fall.”

The prices of feedstock palm stearin for May were at $1,155/tonne FOB Malaysia on 2 May, up by $24/tonne from the same period a month earlier.

Feedstock PFAD prices for June were at $1,090/tonne FOB Malaysia on 30 April.

“The peak buying season [for soap noodles] is usually in February-March, ahead of warmer weather in April-June. So most customers have built [up] their inventories and have no urgency to buy more,” a trader said.

The trader added that only a few deals were concluded in the past month as buyers were purchasing on a hand-to-mouth basis.

The situation is similar in India and China, where prices have increased over the past month.

The prices of the 80/20 blend of soap noodles in India were assessed at Indian rupees (Rs) 63,000-68,000/tonne ($1,190-1,284/tonne) EXW (ex-works) on 27 April, up by Rs3,000-4,000/tonne from the week ended 20 April, in line with firmer raw material costs.

“Sellers have been forced to raise their offers to around Rs66,000-68,000/tonne EXW over the past month because of rising palm stearin and PFAD costs,” an Indian trader said.

Customers increased their buying ideas to Rs63,000-64,000/tonne EXW in response to the firmer offers, according to ICIS data.

However, purchases were limited to the domestic market and trade in the spot import market has been subdued as import cargoes have become too costly, the trader added.

Market players said spot demand is expected to remain weak because the soap noodles market in India has entered its traditional lull demand season.

The peak buying activity in India is usually in February-April, ahead of warmer temperatures that can rise to as high as 50˚C in June-September.

Meanwhile, domestic prices in China were assessed as yuan (CNY) 400/tonne ($63/tonne) higher at CNY8,400-8,800/tonne EXW, in reflection of the discussions heard during the week ended 27 April.

Suppliers raised their offers to the high CNY8,000s/tonne EXW China from around CNY8,400/tonne because of the firmer raw material costs and some are planning to increase their offers further to CNY9,000/tonne in the next few weeks.

As a result, buying ideas rose from CNY8,000/tonne to the low CNY8,400s/tonne, but no deals were concluded.

“Most buyers in China have adopted a wait-and-see stance as they are not in a hurry to purchase fresh material. The prices are too high for them,” a Chinese producer said.

“Demand is weak and purchases are only being made on a need-to basis. Most buyers built up their stock earlier this year to prepare for the summer, which is in July-September,” a second producer said.

Looking further ahead, some market sources said soap noodle prices in Asia may drop in July-September, when feedstock prices are expected to decline.

“The market outlook is uncertain for now. Some players predict the prices will continue rising, while others are expecting the prices to come down in line with lauric acid and palm oil prices,” a southeast Asia-based trader said.

The prices of C12 lauric acid were assessed as $50-100/tonne lower at $1,300-1,350/tonne FOB SE Asia during the week ended 25 April, according to data from ICIS.

Asia’s palm oil contracts were settled at Malaysian ringgit (M$) 3,486/tonne ($1,150/tonne) FOB Malaysia on 30 April, down by M$4/tonne from 18 April.

Soap noodles are produced in two different ways, namely by using fatty acids and palm oil.

In southeast Asia and China, the standard 80/20 grade comprises 80% palm oil and 20% crude palm kernel oil or coconut oil.

In India, the 80/20 ratio comprises 80% PFAD and 20% palm stearin.

($1 = €0.76, $1 = Rs52.95, $1 = CNY6.31, $1 = M$3.03)

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

By: Andrea Heng
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