Europe fatty alcohol market muted on buyer caution

21 November 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--Activity in the European fatty alcohols market remains muted, with many buyers continuing to hold back from first-quarter negotiations in the hope of further falls in pricing, market participants said on Wednesday.

Mid-cut fatty alcohols are currently being traded around €1,350-1,400/tonne ($1,731-1,795/tonne) free delivered (FD) northwest Europe (NWE), sources said.

Plummeting palm kernel oil values throughout the early part of the fourth quarter had previously deterred a number of buyers from entering contract negotiations with their suppliers.

With feedstock values remaining at low levels, many buyers remain hopeful that further declines to mid-cut fatty alcohols will take place.

Palm kernel oil was trading at $740/tonne DEL (delivered) south Malaysia at the close of trade on 21 November, this compares with $960/tonne DEL south Malaysia on 8 August.

“I don’t want to commit to purchasing further volumes when there is a chance that prices will fall further,” one buyer said.

European producers maintain that mid-cut fatty alcohol prices have reached the lowest level they can go; with many arguing that the current pricing level is not maintainable over the long term.

However, with further downward pressure being placed on prices as a result of the excess material being brought over from Asia, some buyers remain hopeful for further declines, and report purchasing volumes on a hand-to-mouth basis.

One buyer reports it had over-estimated demand during the third quarter, and still has excess fatty alcohols left over.

“I am in no hurry to purchase any material at this time,” the buyer said.

The buyer added that it would “possibly re-enter the market during mid-December.” However, with year-end fast approaching and companies looking to destock, the buyer suggested its first-quarter purchasing “hinges on demand from its end-users picking up.”

($1 = €0.78)

By: Neha Popat
+44 208 652 3214

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