11/04/2011 (ISIS) - Malaysia's oleochemicals prices may continue to fall as March stockpiles of feedstock crude palm oil may have reached 1.60m-1.65m tonnes - the highest monthly volume recorded so far this year, industry sources said on Friday.

Prices of most oleochemicals in Malaysia, such as fatty acids, fatty alcohols, glycerine and soap noodles, could decrease by $10-20/tonne (€7-14/tonne) from current levels if Malaysia’s March crude palm oil (CPO) production data shows a further increase in supply, they said.

The Malaysian Palm Oil Board (MPOB) is due to announce last month’s palm production data next week.

Prices of CPO were at Malaysian ringgit (M$) 3,375/tonne ($1,114/tonne) on 8 April, a decrease of M$532/tonne from prices on 5 January at M$3,907/tonne, according to data from Bursa Malaysia. Prices of most oleochemicals also fell by an average of $50-250/tonne during the same period, according to ICIS data.

“If CPO supply increases, prices of all oleochemicals would fall as feedstock is abundant and there is no reason for oleochemical producers to keep prices at current levels,” an Indian buyer of fatty acids said.

Prices of oleochemicals are pegged closely to the prices of feedstock CPO and other CPO derivative oil products such as crude palm kernel oil (CPKO), palm stearin and palm fatty acids distillate (PFAD).

Some market players expect oleochemical prices to begin falling next week, ahead of MPOB’s announcement next Friday.

“It is high time that prices of oleochemicals fell. Since January this year, prices have been mostly inflated,” a Korean buyer added.

A Malaysian fatty alcohol producer said: “If CPO supply increases, CPO price will fall, if CPO price falls, our raw material costs will go down, of course we will lower prices.”

Industry players estimate that end-March CPO stockpiles would total 1.60-1.65 million tonnes, which would be the highest for this year. According to the MPOB, February’s crude palm oil output reached 1.09 million tonnes, with end-February stockpiles reaching 1.48 million stocks. January’s production was 1.05 million tonnes, with end-January stockpiles totalling 1.41 million.

“Cargo surveyor SGS and Intertek Agri Services have estimated that March CPO production will stand at 1.12 million tonnes or 1.11 million tonnes, respectively. This puts the total year-to-date production at 3.25-3.26 million tonnes,” a Singapore palm oil trader said.

“If CPO production continues to improve in April and May, it is likely for end-month stocks in May alone to rise above the psychological level of 2.0 million tonnes,” the trader added.

“If that is the case, CPO prices could be dragged down by at least M$200-300/tonne,” he said.

($1 = €0.70, $1 = M$3.03).