SE Asia soap noodles likely to firm up, demand stays soft

SINGAPORE (ICIS)–Southeast (SE) Asia’ soap noodles prices are expected to firm up because of rising feedstock costs, though demand remains soft compelling players to seek clearer direction amid an uncertain global outlook.

Spot prices of standard blend 80/20 soap noodles containing 78% total fatty matter (TFM) in southeast Asia rose about 5% since the turn of the year, catching buyers by surprise.

The firmer prices were due to higher feedstocks palm oil and palm kernel oil prices.

“Buyers were shocked by the higher offering prices. They were still quoting old prices of several weeks ago at around $600/tonne FOB (free on board) southeast (SE) Asia. Some even asked for $580-590/tonne which is impossible now,” a producer said.

Deals, however, were limited as buyers adopted a cautious approach and put off trades to assess the market situation as downstream demand for bar soap remained weak, according to a trader.

“The market is confused right now,” the trader said. “Crude oil prices have plunged, while palm oil and palm kernel oil prices have stayed stable or gone up.”

Prices slightly softened during the week ended 14 January after the run-up in prices on the first week of the year.

Spot prices on FOB SE Asia basis assessed on 14 January were down $5-10/tonne week-on-week to $645-660/tonne, as players looked for price equilibrium in the market.

This week’s offers were heard at $660-680/tonne, while buyers largely looked to purchase on a need-to basis. Buyers’ views hovered around $610-660/tonne FOB SE Asia.

“Prices will come down due to weak global economic outlook and low crude oil prices. But we have to be fair to the producers too, as feedstock prices had increased,” a buyer said.

WTI crude plunged further to settle at $26.55/bbl on Wednesday for the first time since 2003.

Soap noodles are chips that are used to manufacture bar soaps. They are produced in two different ways, namely by using fatty acids and palm oil.

Image BROKER/REX Shutterstock

Prices of palm stearin on 20 January were at $512.50/tonne FOB Malaysia, up by $7.50/tonne week-on-week.

Feedstock Palm Fatty Acid Distillate (PFAD) prices for the same day closed at $482.50/tonne FOB Malaysia, rising by $12.50 from a week ago.

The prices of C12 lauric acid were assessed as stable-to-soft at $1,050-1,100/tonne FOB SE Asia, $50/tonne lower at the high end of the range during the week ended 20 January, according to data from ICIS.

In southeast Asia, the standard 80/20 grade comprises 80% palm oil and 20% crude palm kernel oil or coconut oil.

Looking ahead, players noted that demand in Africa and Middle East was steady but weak.

As such, players were not certain if the firmer prices would be sustainable in near term.

Other players were looking to the start of Palm and Lauric Oils Price Outlook Conference & Exhibition (POC) to set clearer directions for the feedstocks this year.

The Palm and Lauric Oils Price Outlook Conference & Exhibition (POC) is scheduled to take place on 2-4 March in Kuala Lumpur.

The conference is an annual event attended by international players from the oils and fats industry from over 50 countries to forecast the trend for the year.

“Prices will probably rally again slightly before or during the POC due to positive mood before the event which was the trend in the past,” another trader said.

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

Focus article by Hui Min Lee