US glycerine producers aim for Q2 price hikes of 5-10 cents/lb

10 March 2010 12:00  [Source: ICIS news]

LONDON (ICIS news)--US glycerine producers are aiming for second-quarter contract price increases of 5-10 cents/lb ($110-220/tonne, or €81-163/tonne), hikes that buyers do not think are in the cards, sources said on Wednesday.

The main driver of any increase would be the continued lethargy in the biodiesel industry, which is the main source of crude glycerine.

With biodiesel refiners running at an estimated 10% of capacity, glycerine refiners have seen the cost of their feedstock steadily climb during the past few months.

But just as glycerine market players have started to negotiate second-quarter contracts, the US government is on the cusp of passing a biodiesel-blending tax credit, which would ramp up production of the renewable fuel and drive crude glycerine values lower.

“We are aiming for a 5-cent increase, but we won’t know if it sticks for a couple more weeks,” said one trader. “Since the blender’s credit looks to be a done deal, we may not see much upward movement.” 

US glycerine first-quarter contracts were assessed at 28-45 cents/lb, according to global chemical market intelligence service ICIS pricing.

That range, which was unusually wide for the market, was expected to narrow significantly for the next quarter. Any increase would be based off the low end of the range, sources said. 

Glycerine producer Procter & Gamble (P&G) has issued the largest increase nomination so far, telling its customers that second-quarter prices will be up by 10 cents/lb.

But buyers, and even some traders, have said the market would not take that amount, with producers being lucky to realise half that amount.

“Everyone has been talking increases. But when it came to offers, mine have been slight decreases to rollovers,” said one buyer. “Nothing has happened on the demand side to change anything.”

Major US glycerine producers include Archer Daniels Midland (ADM), P&G and Vantage Oleochem.

Major glycerine buyers include Bayer, Carpenter and Colgate.

($1 = €0.74)

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By: Ben Lefebvre
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