Asia FAE may gain post-holidays on spring-driven demand

Focus article by Angeline Soh

SINGAPORE (ICIS)–Fatty alcohol ethoxylates (FAE) prices in Asia look set to increase on renewed buying interest after the Lunar New Year holidays, market players said on Thursday.

On 19 February, FAE-7, 9 were assessed stable at $1,250-1,300/tonne CIF (cost, insurance and freight) China and at $1,350-1,400/tonne CIF SE (southeast) Asia, according to ICIS data.

Buying momentum in the China market is expected to pick up in March as demand for downstream personal care products typically picks up in the spring season, market sources said.

Market players in China are just returning from their week-long Lunar New Year holidays (18-24 February).

The holiday is also observed in most parts of northeast and southeast Asia for a shorter period.

Overall manufacturing activities in the key China market are expected to gain pace in the second quarter, boding well for the FAE market, they said.

Meanwhile, FAE values will also likely be buoyed up by rising prices of upstream palm kernel oil (PKO), which is in tight supply because of monsoon rains that were affecting production in southeast Asia, market sources said.

Indonesia and Malaysia are the world’s major producers of PKO and its derivatives.

Prices of FAE feedstock fatty alcohols have been tracking PKO prices.

In the week ended 19 February, C12-14 fatty alcohol prices were assessed at $1,390-1500/tonne FOB (free on board) SE (southeast) Asia, up by $40/tonne at the low end of the range from the previous week, according to ICIS data.

Co-feedstock ethylene oxide (EO) prices, meanwhile, were stable at Chinese yuan (CNY) 7,000/tonne EXWH (ex-warehouse) over the same period, after steadily plunging in January, the data showed.

But some market players said that the pick-up in FAE demand could be vapid amid a general weakness in the global economy.

China, which is the world’s second biggest economy, posted its lowest growth in 24 years in 2014 at 7.4%, below its original target of 7.5%. Its economic expansion has been steadily decelerating since 2010.

In January, the country’s official purchasing managers’ index (PMI) showed a reading below the expansion threshold of 50 for the first time in more than two years.

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