19 August 2009 20:57 [Source: ICIS news]
HOUSTON (ICIS news)--Demand from US biodiesel producers is squeezing supplies of fats and greases, tallow-based fatty acid producers said on Wednesday.
Tallow-based fatty acid producers rely heavily upon bleachable fancy tallow (BFT) as a main feedstock for the production of acids and certain soaps.
However, biodiesel producers with multi-feedstock capability can use a variety of fats and greases, instead of just vegetable oils, to make the biofuel.
"Biodiesel producers come in and out of the fats and grease markets depending on crude oil prices,” one fatty acid supplier said.
When crude oil prices offer profitability, or when fats and grease prices are below values for soybean oil, producers jump in to take advantage of a window of opportunity. Such opportunities can assist in keeping facilities operational during weak demand for the fuel, biodiesel sources said.
The knock-off effect on oleochemicals - like tallow-based fatty acids - hits in the feedstock arena, where sources said there is a scramble among buyers of certain fats, such as yellow grease and BFT, to source sufficient and timely volumes.
When tallow and yellow grease demand rises from the biodiesel sector, the price of tallow-based fatty acid feedstock BFT can also rise due to competition within the fats and grease sector.
The average monthly price of BFT is the core element in fatty acid contracts, with some producers using a one-month BFT average and others a two-month.
Rising BFT averages can result in higher prices on various fatty acids in the monthly producer assessments. But a greater effect can develop if the rise is high enough to encourage producers to seek overall contract increases, market sources said.
July’s BFT average for one fatty acid producer was slightly over 26 cents/lb ($573/tonne or €407/tonne), with August values currently tracking in the 32 cents/lb range in Wednesday’s Chicago cash markets.
Tallow-based triple pressed stearic acid contracts in July ranged 53-56 cents/lb delivered, according to global chemical market intelligence service ICIS pricing. July oleic acid was assessed in a 57-62 cents/lb spread.
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