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Asian PSME demand ebbs as end-users switch to petchem feeds: sources

https://www.chemnet.com   Jul 02,2015 Platts
Spot demand for palm stearin methyl ester or PSME is likely to remain depressed for the rest of the year as oleochemical end-users switch to using cheaper petrochemical-based feedstock, market sources said this week.

PSME, typically considered a lower grade of palm methyl ester, is used in the manufacture of oleochemicals that are then used to produce surfactants, soaps and detergents, along with other pharmaceutical products.

In some instances, oleochemical end-users are able to swing between palm- or bio-based raw materials and petrochemical-based ones.

The end-users are now switching to using petrochemical-based surfactants such as linear alkyl benzene sulphonate or LABS, as economics are better as compared with using the more environmentally friendly alternatives like methyl ester sulphonate or MES, which is derived from palm through esterification and sulphonation.

LABS has regained its advantage over MES following a massive slump in benzene spot prices from the middle of 2014. According to Platts data, the FOB Korea benzene benchmark plummeted 59% from $1,424/mt on June 26, 2014, to $578.50/mt on January 15, 2015.

On the other hand, crude palm oil prices trended higher for the first half of June, hitting a year-high of MR2,340/mt ($632/mt) on May 6, as the Malaysian Ringgit slumped to its lowest level in 19 years against the dollar.

The switch to petrochemical-based feedstock resulted in a burgeoning of palm stearin -- the feedstock for PSME.

Indonesian stearin was offered at around $540-$560/mt FOB this week, which equates to around $605-$640/mt for PSME from a breakeven cost point, factoring in processing costs of around $60-$80/mt.

PSME spot prices, however, were notionally pegged at around $607-$632/mt FOB basis this week, as it typically trades at a $65-$90/mt discount to PME.

"[There is] too much stearin in the market," said a producer. "Oleochemical buyers have low demand because most of them have switched back to petrochemical-based [feedstock] as they are quite cheap now."

The next best alternative application for PSME, which is to blend it with PME for consumption in road fuels, was also not looking positive, with gasoil prices hovering below $600/mt still, making discretionary blending of any kind of palm- or bio-based blendstocks uneconomical, market sources said.

"PSME is a dichotomy because it is a perversion of a luxury fuel in order to satisfy the petroleum industry's need for a cheaper price," said a trader.

"PSME is very difficult to blend. People need [the price to be] at least $50/mt below Mean of Platts Singapore Gasoil, or $500/mt delivered Singapore to even start looking at it."

Front-month ICE low sulfur gasoil futures contract was assessed at $572.50/mt at 0830 GMT Wednesday.
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