Europe Q1 fatty alcohol prices slump on weak feedstock

30 January 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--Mid-cut fatty alcohol contract prices in Europe have dramatically declined from fourth quarter levels, settling within a range of €1,130–1,200/tonne for the first quarter, buyers and sellers said on Wednesday.

The range for contract prices, which were settled on a free delivered (FD) northwest Europe (NWE) basis, dropped by €220/tonne on the low, and €400/tonne on the high end from the fourth quarter range.

This follows declines of €300-400/tonne between the third and fourth quarters of 2012, as a result of falling feedstock prices during that time.

Further declines to palm kernel oil values throughout the fourth quarter deterred a number of buyers from entering contract negotiations with their suppliers, a trend which continued in January.

Consumers who concluded business during the end of the fourth quarter reported purchasing material towards the higher end of the range, while those who had held back from negotiations in the hope of cheaper prices were able to secure material at the lower end.

Feedstock palm kernel oil was trading around $747/tonne DEL (delivered) south Malaysia at the close of trade on 30 January. This compares with $960/tonne DEL south Malaysia on 8 August.

Although many participants now argue that mid-cut fatty alcohol prices have reached the lowest level they can go, some buyers remain hopeful for further declines, and report either stalling negotiations or purchasing volumes on a hand-to-mouth basis.

One buyer reports it had over-estimated demand during the previous quarter, and therefore had excess fatty alcohols left over.

Another buyer remains wary over the impacts of the economic downturn on demand, and has opted instead to buy material on a monthly basis, while they gauge demand from their end users.

Hopes among suppliers of a surge in buying demand in the New Year have yet to materialise.

Although buying activity has increased since December, one supplier states it is unsure whether this is a “positive sign” of a pick-up in the industry, or whether buyers are just looking to replenish their stocks.

Many producers argue that current mid-cut price levels are not feasible over the long term.

Although feedstock prices have somewhat stabilised following the slump, many remain concerned.

“With demand levels suppressed and extra capacity due to come onstream later on this year, [fatty alcohol] prices may come under further pressure,” one supplier said.

“This remains a buyers market,” another added.

Buyers were hopeful that a decline to the February ethylene contract price would bring with it a fall in synthetic, and therefore natural fatty alcohols.

However, the ethylene contract price was this week established at €1,275/tonne FD NWE, a rollover for the fourth consecutive month.

The majority of market participants now expect alcohol prices to remain stable until March when the Palm and Lauric Oils Conference & Exhibition Price Outlook conference takes place in Kuala Lumpur, Malaysia.


($1 = €0.74)

By: Neha Popat
+44 208 652 3214

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