Palm kernel oil decline boosts tallow consumers’ interest

19 September 2012 15:09  [Source: ICIS news]

LONDON (ICIS)--Recent declines in palm kernel oil values have led to a surge in enquiries for palm-based fatty acids in Europe, market participants said on Wednesday.

Palm fatty acids generally trade at a premium to their tallow-based counterparts, but the sharp decline in palm kernel oil prices has in some cases led to lower offers for palm fatty acids.

Palm kernel oil was trading at $921/tonne (€709) DEL (Delivered) south Malaysia on 19 September, compared with $1120/tonne DEL south Malaysia at the end of trading on 4 July.

The decline in palm feedstock values has been further accentuated by a shortage of raw tallow feedstock in Europe, causing values of this material to increase and leading to a bullish sentiment among tallow fatty acid producers.

This has seen buyers of tallow-based fatty acids, with the capacity to do so, looking to palm-based material to cut down on operating costs.

Palm oleic acid settled in a range of €1,200–1,350/tonne FD (free delivered) NWE (northwest Europe) for the third quarter, while palm stearic acid prices settled in a range of €1,000–1,200/tonne FD NWE.

Third-quarter tallow oleic acid prices settled at the same level as palm oleic acid, while tallow stearic settled between €1,000–1,150/tonne FD NWE.

Negotiations for fourth-quarter material remain in their early stages; however, initial discussions suggest there will be little change to palm fatty acid prices, leading the majority of suppliers to predict a rollover for Q4.

“A lot of our feedstock was purchased two-to-three months ago when prices were much higher… this argument from consumers is just not justified,” said one producer.

Nevertheless, buyers remain confident they will achieve lower prices for palm fatty acids.

“With increasing numbers of buyers pushing for discounted material, I am sure suppliers will be left with no choice but to drop their offers for Q4, or else face the consequences of having surplus material in storage” a buyer said.

$1 = €0.77

By: Neha Popat
+44 208 652 3214

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