Europe Q2 fatty acids expected to rollover or decline slightly

03 April 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--Second-quarter contract prices in the European fatty acids market are widely expected to rollover or decline slightly from first-quarter levels, sources said on Wednesday.

With second-quarter negotiations nearing a conclusion, participants expect little change to prices, owing to balanced market conditions.

With demand from the biodiesel sector for raw tallow feedstock weak as a result of the extended cold weather being experienced in Europe, sources noted increasing levels of material being made available for oleochemistry.

This has led to a decline in raw tallow feedstock costs, one tallow fatty acids producer now expects prices “around €650/tonne [€507/tonne]” depending on the quality.

This has placed pressure on tallow-based fatty acid prices, with tallow stearic acid currently being discussed in the range of €900-980/tonne FD (free delivered) NWE (northwest Europe), a fall of €50-120/tonne from first-quarter levels.

Tallow oleic prices, meanwhile, are currently being discussed in a range of €1,000-1,200/tonne FD NWE, depending on source. This represents a decline of €50-150/tonne from the first quarter.

Despite significant declines to palm feedstock prices towards the end of 2012 and in the early part of this year, this has yet to translate into lower palm-based fatty acid prices.

Palm kernel oil was this week trading at $744/tonne DEL (delivered) south Malaysia, this compares with prices of $960/tonne DEL south Malaysia reached in early August 2012.

One trader said palm-based fatty acid prices have yet to fall owing to feedstock costs edging up lately, as well as the “lower exchange rate” which is working against participants in Europe.

Palm stearic acid prices are currently being discussed in a range of €900-1,000/tonne FD NWE, a reduction of $50/tonne from the first quarter. While palm oleic acid prices are currently around €1,050-1,150/tonne FD NWE, a reduction of €30-50/tonne from the first quarter.

Market participants expect a conclusion to second-quarter negotiations in the coming weeks.

($1 = €0.78)

By: Neha Popat
+44 208 652 3214

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