Europe Q4 stearic fatty acids values increase from Q3 levels

24 October 2012 23:59  [Source: ICIS news]

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

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

Tallow-based material settled between €1,050-1,200/tonne FD (free delivered) NWE (northwest Europe), an increase of €50/tonne ($65/tonne) on the low and €50/tonne on the high side.

Palm-based material also settled between €1,050-1,200/tonne FD NWE, an increase of €50/tonne on the low side.

A few deals were heard at either side of the above ranges; however, these were outside of the widely agreed consensus.

The slight increase to tallow stearic acid was attributed to the tightness in raw tallow feedstock supplies within Europe during the third quarter.

With the summer months bringing with it an increased demand for raw tallow from the biodiesel industry, many tallow fatty acid producers found difficulty in sourcing material.

Despite increased raw material costs throughout the third-quarter, many suppliers were unable to pass on these costs to their consumers as significant losses in the palm oil markets also placed a strong downward pressure on tallow fatty acid values.

Malaysia crude palm oil (CPO) prices settled at ringgit (M$) 2,420/tonne (€610/tonne) on 24 October, compared with M$3,020/tonne on 27 June.

“With CPO prices plummeting, palm fatty acids became the more competitive option for buyers,” one producer said.

“We were left with no option but to maintain third-quarter pricing levels for material from our plant,” another tallow fatty acids producer said.

Sources report that raw tallow prices have since decreased, as a result of lower demand from biodiesel producers heading into the winter months.

As a result of this improved supply, sources now no longer expect tallow fatty acid prices to increase throughout the fourth quarter. 

Palm oleic fatty acid prices declined slightly from third-quarter levels, settling between €1,200-1,300/tonne FD NWE, a decrease of €50/tonne on the high side.

Although buyers were hopeful that the significant decline to palm feedstock values would see with it a corresponding decline to palm-based fatty acids, sources said the upwards pressure from tallow-based acids kept the price drop minimal.

Tallow oleic fatty acid prices meanwhile remained stable from the previous quarter, settling between €1,200-1,350/tonne FD NWE.

Participants expect prices to remain around these levels for the rest of the year, and do not anticipate any significant changes until the New Year when it is thought activity levels will pick up again. 

($1 = €0.77, €1 = M$3.97)

By: Neha Popat
+44 208 652 3214

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