Stand-off in Europe fatty alcohol market delays Q2 negotiations

20 March 2013 13:30  [Source: ICIS news]

LONDON (ICIS)--A difference of opinion over the impact of recent feedstock developments on fatty alcohol prices continues to stall second-quarter negotiations between buyers and sellers, market participants said on Wednesday.

A slump in feedstock palm kernel oil prices towards the end of last year led to a significant decline in first-quarter fatty alcohol prices in Europe, with mid-cut alcohols settling within a range of €1,130-1,200/tonne ($1,468-1,558/tonne) FD (free delivered) NWE (northwest Europe).

Further declines to feedstock values during the early part of this year led to hopes among many buyers that mid-cut alcohol prices would decline further.

Mid-cut prices reached as low as €1,050/tonne FD NWE, however, feedstock values have since halted their decline and started to edge upwards, sources said.

"I’m currently hearing mid-cut fatty alcohol offers at €1,150/tonne FD NWE, however, this is €50/tonne higher than I am willing to pay,” one buyer said.

Having previously purchased some second-quarter material, the buyer added it is in “no hurry to buy anymore,” and will “hold off” from purchasing any significant volumes.

Suppliers have continued to increase their offers of fatty alcohols in Europe as a result of the firmer feedstock values, leading to a stand-off between the two sides.

“Based on current feedstock pricing, they [mid-cuts] should be at priced at €1,300/tonne FD NWE minimum,” one supplier said.

Another supplier reported it was offering mid-cut fatty alcohols at €1,250/tonne FD NWE, however, was not receiving any buying interest at that level.

“I expect I will have to lower my offers if I am to shift any material,” the supplier said.

Participants had previously expected negotiations to pick up after the Palm and Lauric Oils Conference and Exhibition Price Outlook 2013 in Kuala Lumpur, Malaysia, at the beginning of the month. However, this has yet to occur.

Talk from the event focused on increased crude palm oil production from Indonesia and Malaysia, which analysts believe will lead to an oversupplied market.

This has further affirmed the cautious approach being shown by buyers, with many hopeful that the oversupplied feedstock will lead to another slump in fatty alcohol prices later on in the year.

With differences of over €100/tonne for mid-cut alcohols currently being quoted by different suppliers, participants in Europe do not anticipate progress being made in second-quarter discussions until offers are more aligned with each other.

($1 = €0.78)

By: Neha Popat
+44 208 652 3214

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