27 March 2013 16:43 [Source: ICIS news]
By Judith Taylor
The American Cleaning Institute (ACI), formerly known as the Soap & Detergent Association (SDA), in mid-March said the House Ways and Means Committee members examining ideas to reform the tax code might consider investigating the negative impacts of some tax subsidies.
The tax subsidy of major concern to the ACI and its constituents is the $1/gal US federal tax credit for biodiesel.
With many members in the ACI, the US oleochemical industry is an active participant within the institution.
Oleochemicals are chemicals derived from plant and animal fats and are analogous to petrochemicals which are derived from petroleum.
Oleochemical production of fatty acids from either a vegetable oil or from a tallow fat produces co-product glycerine in a 10:1 ratio, with both these chemicals used in as many as 1,500 varied end-uses such as soaps, detergents, personal care products, tyres and numerous others.
“We are the original ‘green’ industry,” says one oleochemical market participant.
Using the vegetable oils or the fats as feedstocks, the oleochemical industry was relatively quiet compared with the fuel emphasis in petroleum-based product markets.
But the advent of the use of corn, soybean oil and various fats such as bleachable fancy tallow (BFT), yellow grease and poultry fats in biofuels production brought the fuel side into the feedstock markets of the oleochemical industry.
While ethanol is separate - in the US, corn reigns as the primary feedstock - biodiesel is another issue as far as the oleochemical industry is concerned.
Competition for oleochemical feedstocks has been sharp, particularly competition for the fats and greases that many groups outside the immediate markets considered to be ‘waste products’.
“We are not opposed to biofuels. We are opposed to misguided government subsidies that negatively affect the price and availability of animal fats, a key feedstock for the oleochemical industry,” said Douglas Troutman, ACI Vice President and Counsel, Government Affairs in a recent ACI statement.
Troutman went on to say that if energy tax credits are used they should encourage the development and use of new raw materials that do not compete with established uses such as oleochemical production.
According to a major oleochemical producer and glycerine refiner, government programmes subsidising and mandating biodiesel are largely responsible for driving up the prices of the fats and oils that serve as feedstocks for oleochemicals.
Biodiesel is a primary concern for the oleochemical industry because it is typically made by transesterification processes that use fats and oils as feedstock, splitting the molecules to fatty acids and using methanol to produce fatty acid methyl esters (FAME).
This source says that some prices have tripled, moving from prices in the teens per pound a decade ago, increasing to 30 cents/lb, then to 40-50 cents/lb in current markets.
The price increases are ultimately paid for by the consumer and taxpayer, the source added.
Oleochemical industry participants are concerned that the recent increase in the US mandates on biofuels could lead to an additional 2bn lbs of fats and oils being needed as feedstock, increasing the numbers from 7.3bn lbs to 9.3bn lbs required to produce mandated fuel quantities.
But market players outside the oleochemical industry are also alerted to the situation because the cost of other types of fatty acids is rising.
While not totally based upon the price of BFT, stearic and oleic fatty acid prices use various averaging processes of this feedstock cost as part of the acid prices.
One example is C18:1 oleic fatty acid derived from BFT feedstock. According to ICIS, this oleic acid’s prices ranged from about 70 cents/lb in March 2012, to about 82 cents/lb at midyear and levelled off at about 80 cents/lb in March, 2013.
“The problem is in the fats and oils industry and the persistent wild card is biodiesel,” said one fatty acid buyer, along with another participant from the same company, both attending a recent conference.
“Our industry is not subsidised,” another source said. “We have to make it on our own and we’re just asking for fairness,” the source added.
Established in 1926, the ACI is an organisation that represents producers of household, industrial and institutional cleaning products, the ingredients that go into these products and the packaging of them.
This task includes representation and participation by oleochemical producers and others within the cleaning products industry.
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