Asia FAE hits 17-month low; outlook gloomy through to 2015

Focus article by Angeline Soh

SINGAPORE (ICIS)–Spot fatty alcohol ethoxylates (FAE) prices in Asia have nosedived to a 17-month low this week, with the downtrend likely to continue into early next year amid a demand lull during the winter season in China, industry sources said on Friday.

On 26 November, FAE-7 and 9 grades were assessed at $1,490-1,540/tonne CIF (cost, insurance & freight) China, down by $10/tonne from the previous week, according to ICIS data.

In the Chinese domestic market, the same FAE grades were assessed at yuan (CNY) 11,000-11,200/tonne EXWH (ex-warehouse), down by CNY200-300/tonne over the same period, ICIS data showed.

FAE prices typically track the movement of upstream fatty alcohol and ethylene oxide (EO) markets, which are both under pressure, industry sources said.

Mid-cut C12-14 fatty alcohols were assessed at $1,280-1,350/tonne FOB (free on board) SE (southeast) Asia in the week ended 26 November, down by $50/tonne at the high end of the price range compared with the previous week, according to ICIS data.

Prices of fatty alcohols have been on a downtrend since April, with the lowest levels hit in mid-October at $1,230-1,300/tonne FOB SE Asia.

Co-feedstock EO prices, meanwhile, had been comparatively stable – locked in the CNY10,600-10,800/tonne ($1,726-1,759/tonne) EXWH (ex-warehouse) range over the past two months, until 26 November, when prices slipped below CNY10,000/tonne EXWH levels.

Production of different FAE grades is being calibrated, depending on the price movement of feedstocks EO and fatty alcohols, market sources said.

“When EO prices held steady while fatty alcohol prices plummeted, we would focus production on FAE-7 or FAE- 9, instead of FAE-2. The former grade uses more EO and less fatty alcohol as compared with the former,” said a northeast Asia-based producer in Mandarin.

“Now that the EO prices have fallen past the CNY10,000/tonne levels, both grades are just as unprofitable,” the producer said.

China-based buyers, in the meantime, are staying in the sidelines, as the downstream shampoo and shower gel demands are typically low during the winter season, which begins in November.

Trades have been very slow and buyers with urgent requirements usually turn to the domestic producers to secure supply at lower prices and faster delivery times, China-based traders said.

It is almost impossible for imported material to be sold into China, one trader said.

Market players do not expect the outlook to brighten up going into the new year.

While some restocking activities are expected to take place before and after the Lunar New Year in February, the FAE market will be under pressure from a number of EO plant start-ups in China.

“This situation is almost like a sinking ship. We are planning to target markets outside of Asia,” said a southeast Asia-based producer.

South east Asian producers have been targeting the Middle East – which is expected to have a strong demand for FAE –  and other northeast Asian market, where competition is scant.

($1 = CNY6.14)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections