WHITEPAPER

PKO COSTS SKYROCKET 2016

US FATTY ALCOHOL PRICES
By Judith Taylor 22 SEPTEMBER 2016

HOUSTON (ICIS)--Palm kernel oil (PKO) prices in Asia

have risen sharply in 2016, fluctuating widely and introducing volatility into the fatty alcohol market since the
end of the first quarter and skyrocketing the price of US
alcohols in 2016.
The upward volatility from PKO prices pushed hard on
natural alcohol producers in the Asian region because
it contributed strongly to higher production costs and
evaporated alcohol margins.
PKO prices moved from about $800-900/tonne around
mid-2015 to $1,200/tonne later in the year, jumping
higher in 2016 to hit about $1,500 and up by the third
quarter this year. These wide fluctuations pinched alcohol producers because the cost of the PKO purchase
comes well ahead of the sale of the finished alcohol
into the US market usually a three-month lag.
During the second half of 2015 fatty alcohol prices
plummeted into a critical margin situation for most
Asian natural alcohol producers. One result from the

lack of margin was that Asian producers severely cut

back capacity utilisation rates and some shuttered
alcohol production altogether.
Mid-cut alcohol contract prices fell about 17 cents/lb
in the third quarter of 2015 and did not recover from
this dive until negotiations began for the second
quarter 2016.
In 2016, first-quarter C12-15 fatty alcohol contracts
were assessed at 53-62 cents/lb, bulk delivered. The
53 cents/lb low end of the spread marked the turning
point for natural fatty alcohol producers because
margins were gone.
This turning point came during the Palm Oil
Conference (POC) in Malaysia in March 2016.
PKO prices rose from about $800/tonne in December
to over $1100/tonne in March and that is what is pushing prices up, one fatty alcohol producer said as offers
for second-quarter contracts hit in double digits.

90

85

80

US CTS/lb

75

70

65

60

55

50
Jan '15

Apr '15

Jul '15

Oct '15

Jan '16

Apr '16

Jul '16

Fatty Alcohols C12 15 Alcohol DEL USG Contract Price Assessment Truck and R... (Low)
Fatty Alcohols C12 15 Alcohol DEL USG Contract Price Assessment Truck and R... (Mid)
2016 ICIS

Copyright 2016 Reed Business Information Ltd. ICIS is a member of RBI is part of RELX Group plc
ICIS accepts no liability for commercial decisions based on the content of this report

PKO COSTS SKYROCKET 2016 US FATTY ALCOHOL PRICES

Now they are all planning to go into turnarounds in
Asia and that will tighten supply more, a source said.
That was the second-quarter negotiating period
for 2016. Similar conditions prevailed in the thirdquarter 2016 contract negotiations. Prices rose by
double digits on the mid-cut alcohols in each of these
quarters, boosting the range to 79-89 cents/lb by the
third quarter.
PKO prices remain high going into the fourth quarter,
maintaining at $1,500/tonne and over. Additionally,
supply is tight because of the severely curtailed utilisation rates, now said to be under 70% in some cases.
Other situations have arisen whereby at least one
natural alcohol supplier is placing more volume into
markets outside the US and others have elected to
cease imports to the US for the present because
of the low margin opportunities.
In fourth-quarter 2016 contract negotiations, the midcut alcohols are under skyrocket upward pressure
because of the dynamics of 2015-2016 in the PKO
feedstock.
Supplier offers for fourth-quarter natural alcohols
now range from the 90s cents/lb up to 122 cents/lb,
offers that are up about 20 cents/lb over the thirdquarter assessment.
From any producers point of view at this time,
unless there is a long-term customer relationship
then business is not attractive, one large producer/
supplier said.

Market sources said the synthetic producers are also

seeking higher prices for the fourth-quarter, with offers
discussed at similar levels to the natural alcohols.
For the ICIS assessments, synthetic and natural alcohols are represented within the C12-15 designation,
given naturals are typically a C12-14 chain length
and synthetic mid-cuts can be slightly different.
The graph on the previous page shows the price
direction on the high and mid-points across 2015-2016
to September.
Fatty alcohols are a class of alcohol, with the fatty
descriptor stemming from the triglycerides, or fatty
acid triesters, that form the bulk of the oil.
In the natural alcohols the production process involves
the transesterification of the triglycerides to give methyl
esters which are then hydrogenated to give the fatty
alcohols. In the US, Shell and Sasol make synthetic
fatty alcohols using an ethylene or gas-to-liquids (GTL)
route, respectively.
Surfactants surface active agents are the primary
end-use for mid-cut fatty alcohols. Surfactants are
compounds that lower the surface tension between
two liquids or between a liquid and a solid.
Detergent cleaning agents, foaming agents, emulsifiers
and dispersants found in industrial, home and personal
care products are the end-use surfactant market.
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Judith Taylor is a 17-year ICIS Senior Editor Manager, with extensive experience covering a wide range of markets including base
oils, oleochemicals, petrochemicals and the US shipping market. Her current portfolio focuses on the Americas base oil market,
paraffin waxes and fatty alcohols.
Ms. Taylor has covered the Americas base oil market for six years and spent over 10 years covering and developing ICIS oleochemical reports. She is well known in the sector for her expertise on chemical pricing dynamics and logistics, and has spoken at
many industry events and ICIS training courses.
She has an industry background in surfactant chemistry and worked in the US biodiesel industry as a glycerine product manager.
Ms. Taylor holds a Bachelor of Science degree in Biology and a Bachelor of Arts degree in English.

Copyright 2016 Reed Business Information Ltd. ICIS is a member of RBI is part of RELX Group plc
ICIS accepts no liability for commercial decisions based on the content of this report