Europe Q3 fatty oleic acids increase as stearic acids weaken

04 July 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European oleic fatty acid contract prices for the third-quarter have increased from second quarter levels, while stearic acid prices declined slightly, market participants said on Wednesday.

With the majority of the players now thought to have settled contracts for the third-quarter, many indicated an increase in oleic acid prices.

Tallow-based material settled between €1,200-1,350/tonne FD NWE (free delivered, northwest Europe), an increase of €50/tonne on the low side, and €100/tonne ($127/tonne) on the high side.

Palm-based material also settled between €1,200-1,350/tonne FD NWE, an increase of €50/tonne on the low side, and €50/tonne on the high side.

In contrast, stearic acid prices edged down from second-quarter levels.

Tallow-based material was settled between €1,000-1,150/tonne FD NWE, and palm based material between €1,000-1,200/tonne FD NWE

Both these grades fell by €50/tonne on the low side.

Sources explained the different trends were the result of a difference in feedstock pricing, as well as demand levels.

All palm-based feedstock prices saw strong gains earlier in the year, with Bursa Malaysia CPO (crude palm oil) contracts settling at ringgit (M$) 3,576/tonne on 4 April.

However, prices have since fallen throughout the second quarter, with Malaysia CPO prices trading at M$3,020/tonne on 27 June.

Although buyers were hopeful that a decline to feedstock values would see with it a corresponding decline to palm-based fatty acids, this has yet to occur in the European market.

Many also believe that the supply shortages earlier in the second-quarter are having an effect on prices.

“There is still a slight problem in sourcing feedstock for palm oleic acids, and this is placing upward pressure on prices,” explained one producer.

With consumers showing a greater demand for oleic based acids, sources also saw producers of oleic acids achieve success in securing higher prices for this material.

The price increase in palm-oleic acids was thought to be adding to the upwards pressure on tallow-oleic acids, which marked similar increases.  

The lower levels of demand shown by consumers for both palm and tallow stearic acids was the main factor attributed to the lower prices seen for the third-quarter, with ample availabilty both grades of material currently in the market.

Participants expect prices to fall further during the third-quarter as the market reacts to the weaker feedstock values, as well as anticipated lower levels of demand during the summer months.

($1 = €0.79) (€1 = M$3.95)

By: Neha Popat
+44 208 652 3214

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