28 May 2012 07:45 [Source: ICIS news]
SINGAPORE (ICIS)--Asia’s prices of 80/20 soap noodles are falling further, in line with a sharp four-week decline in the feedstock markets, market sources said on Monday.
The prices of 80/20 soap noodles were assessed at $1,080-1,120/tonne (€864-896/tonne) FOB (free on board) southeast Asia for the week ended 25 May, ICIS data showed.
Raw material crude palm oil (CPO) began to fall from Malaysian ringgit (M$) 3,472/tonne ($1,102/tonne) FOB Malaysia during the week ended 2 May to M$3,100/tonne on 23 May, according to data from ICIS.
Soap noodle customers started to lower their buying ideas during the same period, in response to the softening feedstock prices.
Sellers initially kept their selling ideas firm in view of the uncertainty about the prices of CPO, crude palm kernel oil (CPKO) and palm stearin in the region.
“We decided not to lower our prices too early because we were uncertain about the outlook of the feedstock markets when prices started to drop,” a southeast Asia-based producer said.
“During this time, buyers started asking for lower prices and we could not do so because our margins were already squeezed. In addition, palm fatty acid distillate (PFAD) prices were still firm, so softer [soap noodle] prices would mean selling soap noodles at cost or lower,” a second producer said.
The prices of PFAD, which was in tight supply in May, only started to drop during the week ended 9 May, falling from $1,080/tonne FOB Malaysia to $900/tonne FOB Malaysia on 23 May because of weak demand and the overall poor performance of other feedstock markets.
Buyers said they were monitoring the feedstock markets and reduced their buying ideas accordingly.
As a result, the few soap noodle deals that were concluded were on a need-to basis as sellers were unwilling to lower their offers.
“We had no choice but to buy as we have to build our inventories ahead of the warmer season in July-September. Since sellers were unable to give us lower prices, we only bought smaller quantities,” a buyer said.
However, suppliers started to relent in the past two weeks and reduced their soap noodle offers to as low as $1,100/tonne FOB Malaysia and $1,080/tonne FOB Indonesia during the week ended 25 May.
Buying interest remains weak as customers prefer to wait and see how the feedstock markets perform in the near term.
“The situation has changed. Before, buyers were simply taking advantage of the situation, waiting for prices to drop further,” an Indonesian trader said.
“Now that the prices have softened, they remain at the sidelines despite being slightly short on inventory because they just want stability,” added the trader.
($1 = M$3.15, $1 = €0.80)
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