FocusAsia paraffin wax to weaken further on CPO falls, poor demand

14 June 2012 07:32  [Source: ICIS news]

By Jasmine Khoo

SINGAPORE (ICIS)--Spot paraffin wax prices in Asia may continue to fall, in tandem with values of palm wax – a widely used substitute material in making candles – amid weakness in the regional crude palm oil (CPO) futures markets, industry  sources said on Thursday.

In the week ended 13 June, spot parrafin wax was assessed at $1,350-1,400/tonne (€1,080-1,120/tonne) FOB (free on board) China, down by $60/tonne from two weeks ago, according to ICIS.

Palm wax is currently cheaper at $1,000-1,100/tonne FOB Asia, having fallen by $100-200/tonne over the same period, in line with declines in CPO prices, market players said.

Candle makers in southeast Asia – where the palm oil industry is robust – have started switching to cheaper palm wax, further reducing demand for paraffin wax.

“Approximately 90% of the candle makers in Indonesia are now using palm wax instead of paraffin wax,” said a paraffin wax producer in Indonesia.

Palm wax is a CPO derivative that is produced by either chilling and spinning, or hydrogenating steam distilled palm oil, without using any non-organic substances.

CPO prices have been on a downtrend since April this year, shedding almost 20%. At 13:11 Singapore time (06:11 GMT), CPO futures are trading at Malaysian ringgit (M$) 2,901/tonne ($912/tonne), according to data from Bursa Malaysia.

Players in the Asian paraffin wax market are also opting to stay on the sidelines, expecting prices to fall further, amid the eurozone debt crisis and a slowdown in the Chinese economy.

In other parts of Asia, other substitute materials, such as tallow and soybean wax, are blended into paraffin wax to make candles.

Meanwhile, China is in oversupply of paraffin wax, given a continuous robust production of feedstock slackwax in spite of languid demand, market sources said. Slackwax is derived from refining Group 1 base oils.

($1 = €0.80 / $1 = M$3.18)

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

By: Jasmine Khoo
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