Glycerin glimpse in REG’s IPO

Do you know why the blog is interested in this $100m initial public offering (IPO) by America’s largest biodiesel producer Renewable Energy Group (REG)?
Because aside from biodiesel, REG is also a major producer of crude glycerin, the chemical by-product of biodiesel manufacturing (10:1 ratio meaning a 10 lb biodiesel will yield 1 pound crude glycerin). Crude glycerine is usually used in the animal feed market or can be refined or purified for higher-value applications such as in pharmaceuticals, soaps, cosmetics, food and beverages. In fact there are probably over 1,500 different uses of glycerol, according to industry players.Glycerol is structurally analogous to sugars.

According to the US Department of Energy (DOE) in a 2004 study, glycerol is one of the top 12 building block chemicals from biomass although in REG’s case, glycerol is made from natural fats and oils (as we sometimes called it lipids) via the chemical process esterification/transesterification.Crude glycerin has minimum 85% glycerol, with low salts and many organics such as free fatty acids and distillates), according to ICIS.

Within biodiesel production, the purity of biodiesel (and consequently glycerin) depends on the feedstock used. Higher cost virgin vegetable oil feedstocks contain few impurities and are comparatively easy to process while lower cost and unrefined virgin vegetable oil feedstocks generally contain impurities that must be pretreated as part of the production process.
Now the S-1 form filed by REG to the US Securities and Exchange Commission (SEC) mostly talked about the biodiesel industry, which of course, is still important to the blog. However, I really want to get to know more about the glycerin market here in the US. According to our colleagues at ICIS Pricing, glycerin is actually traded either as crude or refined. Major US producers of refined glycerin include agribusiness Cargill, Procter & Gamble Chemicals, Vantage Oleochemicals, Emery Oleochemicals, VVF and PMC Biogenix. Companies need quite a large capital to build a refining glycerin facility by the way.
Unfortunately, REG’s S-1 file did not mention glycerin as much. According to REG, the US biodiesel industry last year was estimated to have produced around 908m gallons, way up from 309m gallons in 2010. So you can do the math if you want to roughly calculate how much crude glycerin was produced last year as well.
REG said it has an aggregate nameplate biodiesel production capacity of 212m gal/year consisting of five wholly-owned facilities and one leased facility. The company has acquired four of its six facilities since 2010. REG primarily produce biodiesel using lower cost feedstock such as inedible animal fat, used cooking oil and inedible corn oil. A small portion of their production uses higher cost virgin vegetable oils.

Now, REG said it also plans to work with technology companies that focus on renewable chemicals and advanced biofuels.

“We are able to offer to co-locate these companies’ equipment and production processes at our existing facilities, as well as to offer design-build, operations and management capabilities to accelerate the commercialization of these companies’ products.” – REG

One such company is REG’s relationship with Glycos Biotechnologies, which is developing chemicals such as ethanol, isoprene, acetone, hydrogen, 1,2 propanediol and other organic acids such as lactic acid, succinic acid and formic acid using crude glycerin as feedstock. REG has been collaborating with GlycosBio since 2007.

One of REG’s plans is to acquire or invest in biodiesel, renewable chemicals or other advanced biofuel production and distribution assets in select international markets targeting large end-user or large feedstock generating markets. The company also plans to expand into the production of renewable chemicals, additional advanced biofuels, next generation feedstocks, such as algae oil, and related renewable products.

Here is a chart from the DOE’s 2004 biomass chemicals study for those who are interested in new glycerin applications:

In fact, my ICIS colleague Judith Taylor recently wrote a story (it’s free! Yey!) on new refined glycerin uses. According to her, the exit of ADM from the USP glycerin market this January will take pounds out of the refined glycerin market to be used in the production of monopropylene glycol (MPG). As you know, ADM began operation of its 100,000 tonne/year glycerin-based MPG plant at Decatur, Illinois, in the second quarter last year.

Market participants expected about 5m lb (2,268 tonnes) of refined glycerine to be utilised in the glycol market in 2012, and expected this number to increase by the end of the year.

Here are some other news that the blog posted last year on glycerin:

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