OUTLOOK ’18: Asia FAE likely steady in Q1 on mixed feedstock, varied demand

SINGAPORE (ICIS)–Fatty alcohol ethoxylates (FAE) spot markets in Asia may hold largely stable on the back of mixed feedstock costs and varied demand in the first quarter of the year.

In the near term, mixed upstream costs are likely to influence FAE markets by exerting opposing pressure on spot prices. The co-feedstocks required for FAE production are ethylene oxide (EO) and C12-14 fatty alcohols.

Upstream EO prices may rise slightly to reach a peak due to the recent uptrend in ethylene costs, and some time may be needed for prices to significantly weaken, sources said.

China domestic prices for EO were at yuan (CNY) 10,600/tonne EXWH (ex-warehouse) on 3 January, after peaking at an eight-month high CNY 10,600-10,800/tonne EXWH on 13 and 20 December, according to data compiled by ICIS.

Conversely, co-feedstock C12-14 fatty alcohol markets have started to show signs of softening amid a recent downtrend in its feedstock palm kernel oil (PKO) and weaker buying interest.

Regional PKO in South Malaysia were transacted at around $1,243/tonne DEL (delivered) on 2 January, ICIS data showed.

With lower C12-14 fatty alcohols costs, there would be some downward pressure placed on the FAE markets in the first few months of the year, sources said.

Producers may also be more inclined to make certain grades of FAE with higher fatty alcohol content.

Overall, pricing uncertainty continues to be a concern among market participants.

“There are various supply-demand fundamentals to consider and it is difficult to see which feedstock factor may impact the market more for now,” a producer in southeast Asia said.

Additionally, the current tightness in spot availability may require some time to ease, given that some ethoxylates plants in Asia had just restarted.

Manufacturers with low inventories are likely to fulfil contractual obligations or focus on their domestic markets first.

Lacklustre world economic growth, global overcapacity, and an increasingly stringent regulatory environment in China, are seen to be macroeconomic factors affecting the surfactants sector in Asia, especially from a selling perspective.

Some producers have turned to new technologies and applications to appeal to their customers.

For instance, the recent technology using the shale gas route to produce ethoxylates may increase competition in the global surfactants market.

On the buying side, varied demand is expected across the Asia-Pacific region.

While most buyers will remain cautious, some may increase FAE purchases to raise their low inventory levels.

Certain consumers may procure more volumes before the February holiday period in order to minimise logistical issues, and this may cause a spike in January demand.

Buying interest in the detergent sector is likely to hold stable, whereas demand for the textile sector may weaken in the near term, sources said.

Fatty alcohol ethoxylates (FAE) is a surfactant often used in the manufacture of personal care and industrial cleaning products.

For the week ended 3 January, FAE-7,9 spot prices in southeast Asia were assessed at $1,800/tonne CIF (cost insurance and freight) SE (southeast) Asia, 9% higher from the start of 2017. China import prices rose by around 7% to $1,770/tonne CIF China in the same period.

Outlook article by Kheng Wee Loy