US Q4 fatty alcohols contracts settle flat to down as synthetic becomes more competitive

Author: Lucas Hall

2019/10/09

HOUSTON (ICIS)--US fourth quarter fatty alcohol contracts were assessed mostly flat to down. Although domestic demand is healthy, contracts faced downward pressure amid ample supply to meet domestic demand as well as lower feedstock costs in southeast Asia.

Fourth quarter C12-C15 mid-cut contracts settled anywhere from a rollover to down 3 cents/lb ($66/tonne) to 61.50-70.50 cents/lb on a delivered (DEL) basis.

Despite healthy demand, lower fourth quarter contracts largely decreased because of high feedstock inventory levels and lower feedstock prices in the natural alcohols sector.

However, some contracts decreased because of ready supply of both natural and synthetic alcohols in the US market.

In the US, synthetic alcohol production is another supply route for mid-cut alcohols. Following several quarters of short supply, mid-cut synthetic alcohol production improved during the third quarter. This gave ready supply into the US domestic market as well as offering material into Europe to sustain requirements following the closure of alcohol production at the Stanlow refinery in the United Kingdom.

Entering the fourth-quarter contract negotiations on the mid-cuts, buyers commented about being approached by synthetic producers for the first time in a number of quarters, putting downward pressure on contract prices despite healthy demand.

These actions on fourth-quarter volumes could prompt sharper competitive activity to develop between synthetic and natural alcohols players, pressuring prices further.

Some sources have speculated that more synthetic alcohol is in the market because less volume is going to Europe. Other sources said synthetic producer expansions are becoming active, bringing more alcohol into the market.

Fourth quarter C16-18 contracts largely settled at a rollover, with some contracts slightly down. Although domestic demand is healthy, contracts faced downward pressure from lower feedstock costs in Asia and ample supply.

C16-18 blended alcohol demand is slightly lower amid higher inventory levels, prompting some contracts to settle slightly lower in the fourth quarter.

In the US fatty alcohols market, contracts are mostly quarterly with no announcements. Contracts are conducted on an account-by-account basis across the market between sellers and buyers.

The following graph shows price trends for the C12-15 mid-cuts alongside the C12-14 natural alcohol spot prices in southeast Asia. The US C12-15 carbon spread seeks to include synthetic alcohols by showing the extra carbon unit.

The graph also shows price trends for the US C16-18 market alongside spot prices in southeast Asia.

ICIS Editorial Chart goes here

US players are likely to watch feedstock inventory levels and costs in southeast Asia as well as synthetic production and prices in the US as they look toward the first quarter.

The US is a major net importer of natural fatty alcohols and a key production region for synthetic alcohols.

The key end use for mid-cut alcohols is surfactants. This class of chemical products comprise numerous cleaning and detergent uses, ranging from household agents to oilfield applications.

Focus article by Lucas Hall