Soft demand blunts Q2 US glycerine contract hikes

25 March 2009 17:46  [Source: ICIS news]

HOUSTON (ICIS news)--US glycerine second-quarter contracts settled higher than buyers wanted but lower than suppliers originally expected, as tightening supply offset lowered demand, sources said on Wednesday.

Most US producers went into negotiations earlier this month calling for 5-10 cent/lb increases on the expectation that the shrinking availability of crude glycerine would cut back refining rates.

But with some estimates placing downstream demand down 20% from last year, buyers were able to play producers off one another as negotiations wore on, sources said. 

“I think there’s so little being bought in the industrial sector, it comes down to who needs to get rid of product first,” one large US buyer said.

Global chemical market intelligence service ICIS pricing assessed vegetable-derived glycerine contract prices at 37-50 cents/lb ($816-1,102/tonne, €604-815/tonne), and tallow-based glycerine at 35-47 cents/lb. That compares with first-quarter contracts of 35-50 cents/lb for vegetable glycerine and 33-50 cents/lb for tallow glycerine.

Pharmaceutical-grade glycerine prices for the second quarter were assessed at 65-75 cents/lb, up 5 cents/lb from the previous quarter.

Sellers said they had originally thought that they would have gained more because of tight supply, as cuts in biodiesel and fatty acid production have shrunk the crude glycerine supply, but it was not to be.  

“Based on lack of buying, price levels will go down,” one supplier said of the new contracts. “I would have liked to get 5-10 cents/lb up, but it hasn’t worked.”

Major US glycerine producers include ADM, Cargill, P&G and Uniqema. Large buyers include Bayer, Carpenter and Pharma Corp.

($1 = €0.74)

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By: Ben Lefebvre
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