28 March 2014 09:45 [Source: ICB]
Fatty acids and their chemical derivatives have a place in almost every phase of modern living. Fatty acids are largely used in cosmetics and toiletries such as shampoos, liquid detergents, fabric softeners and body lotions. They are also used as lubricants and plasticizers in rubber and polymer processing as they improve the performance of paints, plastics, lubricants, textiles and rubber products.
Additionally, fatty acids add wanted qualities to foods – mainly to modify other well-known materials.
In recent years, global fatty acid demand has increased as a result of end-use consumption growth, as well as strong growth of oleochemicals (fatty acids, fatty alcohol, glycerine).
Oleic fatty acids have seen increased demand in North America, with the upswing driven largely by new and broader use of the C18s in oilfield and drilling applications. Stronger US demand began to exert its effect on fundamentals in the latter part of 2012, draining ready supply of tallow derived oleics and pulling sharply on C18s from tall oil feedstock, referred to as TOFAs, or tall oil fatty acids.
Since most vegetable derived fatty acids are imported from Asia, local tallow-based oleic acids are more commonly being used in these evolving industrial applications.
Demand from US biodiesel producers has squeezed supplies of fats and greases in recent years.
However, with uncertainty of the fate of the US biodiesel industry as the $1/gal federal tax incentive has expired and mandated blending obligations are static, the competition for feedstocks has retreated to a degree.
In comparison to tallow-based fatty acid producers, which rely heavily on bleachable fancy tallow (BFT) as a main feedstock for the production of acids and certain soaps, biodiesel producers can use a variety of fats and greases including yellow grease and dried distiller’s grains (DDG).
The tallow-based fatty acid market in the US remains steady with supply/demand dynamics status quo in recent months. US C18 tallow-based triple-pressed stearic acid (TPSA), C18 stearic rubber grade supply is balanced, but trending slightly long. C18:1 oleic acid supply is balanced.
C18 tallow-based TPSA prices were assessed lower on 12 March to 52.50-56.50 cents/lb, as much of the US tallow-based fatty acids market participates in formula pricing and BFT averages for the previous month.
Rubber-grade prices in a 46.50-51.50 cent/lb spread were also said to be representative for current business while C18:1 oleic fatty acids were at 68.50-72.50 cents/lb for March business.
Fatty acids are derived primarily from vegetable oils such as palm and coconut oil. Most fatty acid production is in southeast Asia, particularly Malaysia, Indonesia and the Philippines. Palm oil is the raw material used for fatty acid production in Malaysia and Indonesia, while coconut oil is used in the Philippines.
In North America, fatty acids are produced primarily from tallow fats. The basic acids from this production are the C18 stearic acids.
The production process here utilizes BFT for the main feedstock, which is rendered from cattle and hog material after slaughter. Glycerine is a co-product of fatty acid production.
The tallow-based fatty acid market in the US is steady with supply/demand dynamics stable. However, higher prices in the imported vegetable-based fatty acids could push the market higher. Firm palm kernel oil (PKO) costs in Southeast Asia has added upward pressure to fatty acid prices in southeast Asia in recent weeks.
Additionally, the use of oil and fat feedstocks instead of petroleum-based feedstocks to make industrial products such as biofuels and plastics has created competition for fatty acids production in recent years. This in turn has affected pricing, but these applications are largely dependent on crude oil prices and whether it will make cost-effective sense to make the switch.
In 2014, US tallow and other grease prices are expected to be more available because of changing feedstock choices available for multi-feedstock biodiesel production. Lower biodiesel production rates, paired with other feedstock options, are expected to take the pressure off tallow prices in 2014. Increasing use of dried distiller’s grains (DDG) corn oil in biodiesel is also relieving pressure on the supply of tallow.
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