20 February 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--Second-quarter fatty alcohol contract negotiations are yet to begin in Europe despite a price slump that would usually encourage buyers into the market, participants said on Wednesday.
Prices have continued to fall since the conclusion of first-quarter contract discussions, when mid-cuts settled within a range of €1,130-1,200/tonne ($1,507-1,600/tonne) FD (free delivered) NWE (northwest Europe).
A combination of ample supply, as well as weakening feedstock prices, has placed further bearish pressure on prices.
Both suppliers and buyers this week report mid-cut alcohol prices at €1,050-1,100/tonne FD NWE.
Although lower prices would usually entice buyers into the market, many are opting to stay away until after next month's Palm and Lauric Oils Conference & Exhibition Price Outlook conference (POC) in Kuala Lumpur, Malaysia.
The key event, which is held during the first week of March, sees participants discuss future feedstock pricing, and in the weeks after prices tend to follow the sentiment within the market.
Although there is no guarantee that feedstock prices will decline further, producers note increasing numbers of buyers opting to stay away from the market.
“Many are waiting for feedstock developments in the aftermath of the POC, in the hope that these will decline and place further pressure on [fatty alcohol] prices” one said.
A difference of opinion exists between the suppliers and buyers as to whether there is the potential for feedstock prices to come down further.
Suppliers remain confident that feedstock prices have now bottomed out and will increase after the event, as is usually the case.
Buyers, however, are sceptical.
When asked whether it is possible that feedstock prices could increase after the event, one buyer suggested that this is indeed a possibility, although he added that the current market conditions deemed it not likely to have an impact on fatty alcohol pricing.
“With plenty of material available in Europe, and demand not as strong as it used to be, I do not think it is likely that producers can justify any price hikes,” he said.
Feedstock palm kernel oil was trading around $795/tonne DEL (delivered) south Malaysia at the close of trade on 20 February.
This compares with highs of $960/tonne DEL south Malaysia reached in August last year.
Participants do not expect contractual negotiations to commence until mid March, with a likely conclusion reached during early April.
($1 = €0.75)
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