28 December 2010 15:26 [Source: ICIS news]
By Judith Taylor
HOUSTON (ICIS)--The ?xml:namespace>
The ride hasn’t been an easy one for the oleochemical community for several years, with numerous bumps delivered courtesy of biofuels - mostly biodiesel, although ethanol also has played a role.
In many ways,biofuels and oleochemicals lay in the crosshairs of agricultural and petrochemical tiers. Oleochemical production uses the same feedstocks as biofuels: fats, food, oils and greases.
Biodiesel production uses fats and greases, such as tallow and yellow grease, and food oils such as soybean oil and canola (rapeseed).
Tallow-based fatty acid producers partially blamed multi-feedstock biodiesel production for feedstock bleachable fancy tallow (BFT) grease prices moving up from low-20s cents/lb to mid-30s cents/lb during 2008-2009. This move also shaved margins and brought increased volatility to the co-product glycerine market. The
In 2010, grease prices continued to rise, and crude glycerine supply tightened on diminishing production rates.
BFT price averages jumped nearly 7 cents/lb ($154/tonne, €117/tonne) between October and November 2010, rising from the mid-30s cents/lb to the low-40s cents/lb.
Grease traders attributed the jump to a prevailing crimp in fats and grease supply in the
Oleochemical production also shares a common co-product with biodiesel: crude glycerine.
Bio-crude - crude glycerine from the biodiesel process - typically contains methanol. Good quality bio-crude is generally agreed to be crude glycerine with no more than 20% methanol content.
Bio-crude glycerine prices ranged from less than 1 cent/lb during 2008-2009 - when the material was either burned or sprayed into coal mines to control dust – up to current prices of about 12-16 cents/lb.
Oleochemical production processes yield a co-product glycerine that is of a higher purity with no methanol residues, often referred to as splitter crude.
Most oleochemical producers directly refine splitter crude up to 99.9% purity and sell the refined glycerine into numerous value-added, commodity end-use markets such as cosmetics, home care products, food and pharmaceuticals.
Some biodiesel producers began to semi-refine the bio-crude glycerine to 89-92% purities, and sell that to oleochemical refiners to take to the higher purity level in order to move the glycerine into value-added end-use segments.
The developing crude glycerine supply symbiosis between the biodiesel industry and the oleochemical industry was cut short by widely-reduced US biodiesel production.
Ready supply was soaked up by improving demand amid a recovering US economy in 2010, tightening crude and refined glycerine supply/demand factors in the fourth quarter of 2010 and the offering of firming price sentiment in first-quarter 2011 contract negotiations.
Refined glycerine prices moved from the high-20s and low-30s cents/lb in the second half of 2010, and appeared headed toward the mid-30s cents/lb in current first-quarter contract negotiations.
But volatility could erupt in 2011 based upon supply/demand uncertainties.
If US refined glycerine demand continues to grow and biodiesel production ramps up in an organised fashion - contrary to historical indicators - then glycerine and fatty acid supply/demand factors could maintain a fair balance in 2011.
But if refined glycerine demand is routinely steady and US biodiesel production increases the flow of bio-crude, then oversupplied conditions could emerge, invoking similar price volatility seen in 2008-2010.($1 = €0.76)
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