US Q1 refined glycerine sentiment firms on improved supply/demand

21 December 2010 22:21  [Source: ICIS news]

HOUSTON (ICIS)--US refined glycerine contracts are firming in first-quarter negotiations because of tighter supply and higher demand, suppliers and buyers said on Tuesday.

“It’s a little crazy, but prices are improving,” one glycerine player said about the first-quarter contract season.

One reason some suppliers are characterising negotiations as “crazy” is because of the uncertainties in crude-glycerine supply and refined-glycerine demand.

The improving supply/demand factors arose between the third and fourth quarters, as the US economy strengthened and demand increased for such glycerine end-use segments as cosmetics and foods, sources said.

Over the same time, inventories of crude glycerine from biodiesel – referred to as bio-crude – tightened on the back of widely reduced biodiesel production stemming from the 31 December 2009 expiration of the US federal tax credit.

That supply crimp, plus the typical industry reluctance to commercially sell the fatty-acid and soap-making co-product crude glycerine – referred to as splitter crude – soaked up crude glycerine in general and tightened overall supply factors for refined glycerine.

Splitter-crude glycerine typically goes directly into refining to make the value-added end-use products mentioned. Bio-crude can be processed to a semi-refined state of at least 90%, then sold for further refining toward use in the same areas.

But the first-quarter contract negotiations came at the same time as the reinstatement of the biodiesel tax credit, opening the door for increased biodiesel production, and subsequently, increased production of co-product bio-crude glycerine.

Glycerine suppliers said nothing past quarterly contract price protection was being offered to buyers because of price uncertainties.

“Supply can go either way right now. Up or down, we just can’t tell,” one glycerine supplier said.

Refined vegetable glycerine contract prices were last assessed in a 34-44 cents/lb ($750-970/tonne, €570-737/tonne) range, with tallow at 32-43 cents/lb.

Bio-crude glycerine was last assessed at 12-16 cents/lb, with splitter crude at about 18-20 cents/lb, but rarely traded in commercial activity.

US glycerine producers include Procter & Gamble, Vantage Oleochemical, Dial and Twin Rivers Technology. Bio-crude producers and refiners include Archer Daniels Midland (ADM) and Cargill.

($1 = €0.76)

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By: Judith Taylor
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