HOUSTON (ICIS)--US fatty alcohol buyers are keeping a close watch on palm kernel oil (PKO) prices because sinking prices for the Asian feedstock have buyers and sellers at odds on forward positions in alcohol purchases, according to sources on Thursday.
PKO prices soared about the middle of the first quarter but began to fall sharply during the second half of the quarter. This set buyers and sellers at opposition in the second quarter contract negotiations that generally settle by the last week of the first quarter.
Second-quarter mid-cut alcohol contracts settled in early April with a gain of 11 cents/lb on the low side end and 7 cents/lb on the high end of the ICIS assessment of 116-125 cents/lb ($2,557-2,755/tonne).
Sellers initially sought to raise natural mid-cut alcohol prices by as much as 20 cents/lb. However, falling PKO prices eroded this level amid stout buyer resistance.
With the challenging second quarter settled, buyers and sellers continue to watch the PKO price-dive because both sides of the market are hesitant to secure and move forward cargoes.
PKO prices continue to sink, with the key Malaysian market showing about $100/tonne loss this week.
Waterbourne cargoes take 30-45 days to arrive from Asian ports to the US Gulf coast. With that timespan in consideration and PKO prices presently falling, sellers are reluctant to go beyond May arrivals. Some buyers elected to contract for only partial second-quarter requirements on the option of achieving some price reduction by mid-quarter.