US tallow fatty acid prices climb on higher feedstock costs

27 January 2011 16:43  [Source: ICIS news]

ORLANDO, Florida (ICIS)--US tallow-based fatty acid contract prices are rising because of higher feedstock costs, fatty acid producers said on Thursday.

The producers spoke from the sidelines of the American Cleaning Institute (ACI) meeting in Orlando, Florida.

“Feedstock costs are our biggest concern,” a major tallow fatty acid supplier said. “Where is the ceiling on feedstock prices?” 

Feedstock bleachable fancy tallow (BFT) prices hit 49.50 cents/lb ($1,091/tonne, €797/tonne) in the Chicago cash market on Wednesday, up from 27 cents/lb at the same time last year and more than 1 cent/lb higher from the prior week.

Fatty acid market participants said biodiesel was playing an active role in the run-up on tallow feedstock costs because tallow sellers were holding back inventory while waiting for the US biodiesel industry to reconsolidate.

US biodiesel production output collapsed to less than 15% of capacity when the $1/gal federal blender tax credit expired in December 2009. The tax credit stumbled back into the market at the end of 2010 in last-minute legislative sessions, becoming effective in January 2011 and retroactive to 2010.

A slow resurgence of the industry was expected because of ongoing uncertainties in feedstock costs, plant start-up costs and the lack of a clearly defined domestic market, biodiesel market players recently said.

Both biodiesel and oleochemical market participants expected that a full resurgence would not occur until well into the 2011 second quarter.

Several US tallow fatty acid producers had considered putting a volatility index into contract pricing formulas, sources said.

While the volatility index strategy would have offered greater flexibility in coping with sharp rises and falls in feedstock costs, not all US producers favoured the strategy and it failed to take hold in contracts, market participants verified.

Tallow-based triple-pressed stearic acid (TPSA) C18 prices were last assessed by ICIS at 56–58 cents/lb, with rubber-grade (RBG) C18 at 51–54 cents/lb.

Oleic C18:1 tallow fatty acids were assessed at 65–68 cents/lb. Upward pressure continued to be primarily on the C18:1 fraction because strong demand from industrial lubricants and surfactants was said to be soaking up inventories.

US fatty acid producers include Emery Oleo, Vantage Oleochemical, Dial Corporation and Twin Rivers Technologies.

End-uses for tallow fatty acids range from industrial lubricants and surfactants to food-grade applications.

($1 = €0.73)

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By: Judith Taylor
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