Softening palm oil prices deter European fatty alcohol buyers

30 May 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--Declining palm feedstock prices continue to deter buyers in the European fatty alcohols market, leading to a delay in third-quarter contract negotiations, participants said on Wednesday.

Having steadily fallen in price over the past two months, crude palm oil was at ringgit (M$)3,150/tonne ($1,000/tonne) FOB (free on board) Malaysia at the close of trade on 30 May.

Although this has yet to have an influence on prices of fatty alcohols in Europe, buyers remain hopeful that the softening feedstock values will soon translate into lower fatty alcohol prices.

A significant shortage of fatty alcohols throughout the second quarter has had a firming effect on prices in Europe. With supplies increasingly short, trades in the spot market for mid-cut material continue to rise.

“Mid-cut fatty alcohols are now being offered in the market at €2,050/tonne [$2,562/tonne] ex tank,” one buyer said.

This compares to an average of €1,875/tonne FD (free delivered) NWE (northwest Europe) during second-quarter contract negotiations.

European suppliers note increasing reluctance among their regular buyers as a result.

“There is a lot of hesitation [among buyers] at the moment, many are waiting on the sidelines and watching what happens,” one producer said.

With demand currently at lower levels than anticipated, buyers are in no hurry to commence negotiations for the third quarter. Traders are also noting increased levels of enquiries from buyers looking to purchase material and then holding back from concluding business.

Another European buyer has purchased enough material to cover only its contracted requirements, and will look to purchase further volumes in July if fatty alcohols prices fall further.

With confusion rife in the market over the direction that feedstock prices will head, participants agree that negotiations will be slower off the mark than usual.

($1 = €0.80) (€1 = M$3.15)

By: Neha Popat
+44 208 652 3214

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