Fatty alcohols prices rise in the US despite additional Asian supply

A slew of new capacity means lower prices, right? Not always. The US fatty alcohols market has seen prices run up despite new supply emerging in Asia

Are you affected by rising fatty alcohol prices? Let us know through ICIS connect

Judith Taylor/Houston

US BUYERS of fatty alcohols had been awaiting substantial new capacity in Asia that was anticipated to usher in lower prices.

But instead, they paid higher prices in the third and fourth quarters of 2007, and again in the first quarter of 2008.

In the first quarter, many US buyers absorbed double-digit price increases on alcohols for the second time in a year.

Drivers for such increases were lodged in Asian vegetable oil feedstock prices that rose on the tide of petroleum crude oil, as well as an unusually short supply of straight cut C10 alcohol.

Surfactant range alcohols in the C12-14 natural and synthetic blends dominate the market in terms of volume, but short-chain C8-10 natural and synthetic blends have gained growing attention because of their use in new applications such as wood preservatives.

The Asian market is the supply locus, while the US offers giant end-use demand for detergents and other surfactants,.

But synthetic supply in the surfactant C12-14 and C12-15 branched alcohols comes into play in the US from Anglo-Dutch major Shell Chemicals, while South Africa’s Sasol brings additional straight cut C10 supply into the mix.

C12-14 natural and synthetic and C12-15 synthetic alcohols were assessed by global market intelligence service ICIS pricing in the 84-93 cents/lb range in the second quarter, up by 5-7 cents/lb.

Short-chain C8-10 natural and synthetic and C8-11 or C9-11 synthetic alcohols were assessed for the same period in a $1.40-$1.55/lb range, moving up by about 20 cents/lb because of tight supply driven by the C10 factor.

Heavy cut blended alcohols C16-18 were assessed in a 75-83 cents/lb range in the second quarter, steadier than the other two tracked pricing groups, as a result of better opportunities to balance feedstock volatility.

US buyers, in particular, expected fresh supply to bring price relief in 2007, with a gush of new natural alcohol material expected. Some buyers anticipated moving from synthetic to natural alcohols, expecting that the natural C12-14 price would fall well below the synthetic.

But the natural and synthetic prices stayed within parity in many situations, with up and down ethylene prices holding sway along with the natural vegetable oils.

PRICES GO NUTS

Coconut oil prices more than doubled from about 27-30 cents/lb in Chicago markets in mid-2007 to the upper 60 cents/lb range in today’s heated price arena.

Crude palm oil prices in Asia rose to record levels, along with crude petroleum oil, and buyer hopes for even rollover price levels evaporated in the first quarter of 2008.

There is a long list in Asia of newly operating plants, those hoping to start up, and those struggling to move into start-up mode.

Among the front-runners Indonesia-based Sawit Mas, which signed a 160,000 tonne fatty alcohols supply agreement with US consumer products giant Procter & Gamble in 2005, appeared to have about 40,000 tonnes operating as of 2007 at its Domba Mas unit. But the balance was said to be indefinitely delayed.

Also in Indonesia, Musim Mas has about 100,000 tonnes said to be ready to market in this quarter, with US buyers confirming that some material is already coming into the US.

The 100,000 tonne/year Palm Oleo plant in Malaysia is said to be up and running, with marketing activities in Europe and the US.

Although the list of expected capacity additions goes on, it remains unclear how much will actually come on and what impact this will have on price.

THROUGH THE WRINGER

US buyers expecting price breaks in the third quarter may have to take a hard look at supply and demand realities once again.

Increases of 7-8 cents/lb were being heard in early June, with no confirmed price moves verified, but buyers were already becoming aware that the upward price march might not be finished.

On the other hand, new material is creeping into the market and the new players are apparently willing to take lower prices in the third quarter, in the hope of gaining a foothold in North America.

With additional reporting by Jeremiah Tan in Singapore

Judith Taylor is a nine-year veteran and senior editor for ICIS pricing in Houston Texas, US, with a portfolio that includes oleochemicals. She has a science background, including a bachelor’s degree in biology and a minor in chemistry.

For more on fatty alcohols pricing