26 May 2010 18:58 [Source: ICIS news]
HOUSTON (ICIS news)-- US refined glycerine spot prices lunged down as the ramping up of fatty acid production for dispersants to fight the Gulf oil spill created a glycerine supply glut, sources said on Wednesday.
While oil giant BP continued its month-long fight against the oil spill at its sunken Deepwater Horizon well, oleochemical makers have increased production of fatty acids to help make the spill dispersants, sources have said.
That’s led to a glut of fatty acid co-product glycerine, which was reaching the market at discount prices, buyers and sellers said.
“I’ve gotten more calls than normal in the past few weeks,” a buyer said. “They’re asking me what price I would pay for five rail cars. They might as well just spray it on coal.”
Buyers, sellers and brokers said glycerine spot prices were in the high-20s to low 30s cents/lb FOB (free on board) Midwest, compared with 30-36 cents/lb ($661-794/tonne, €535-643/tonne) the week before.
Compounding the downward price pressure was a reported cargo of imported glycerine from Asia that arrived slightly off spec, which caused its owner to sell the material at a discount, a broker said.
“It’s off-colour, otherwise its 99.9% purity,” a broker familiar with the matter said. “Everything is being offered at 26-29 cents/lb.”
Buyers and sellers said they did not think refined glycerine prices would continue at this level for long and would not have much impact on third-quarter contact negotiations. At most, the sudden market glut would cap producers’ ability to raise contract prices for the next three months.
“The spot price will not have a major impact on Q3 contracts, but it will have some impact,” a buyer said.
Glycerine producers include Procter & Gamble, Vantage Oleochemical, Emery Oleochemicals and VVF. Buyers include Bayer, Carpenter, Colgate-Palmolive and Lonza.
($1 = €0.81)
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