Crude glycerine in China rebounds on supply disruption concerns

Focus article by Alexis Gan

SINGAPORE (ICIS)–China’s import prices for crude glycerine rebounded this week as buyers started restocking on concerns over a possible supply shortage that could nudge up prices further, market sources said on Friday.

On 10 December, crude glycerine prices were assessed at $190-207/tonne CIF (cost, insurance and freight) CMP (China main port), up by $7-10/tonne from the previous week, according to ICIS.

“We might see further short term uptrend for the prices in China since supply level to China has declined as sellers were unwilling to erode margins further,” a trader said.

Buyers, particularly refiners for refined glycerine and end-users in coatings sector have concluded a number of parcels of mostly non-dutiable material from southeast Asia at a higher price – around $10/tonne higher than earlier discussions a few weeks ago.

“They [the buyers] would rather pay slightly higher now,” said a major broker in China.

Supply uncertainties raise the possibility of higher price for crude glycerine one to two months down the road, the broker said.

Sellers were mostly bullish, with offers quoted $10-20/tonne higher from a week ago, market sources said.

Major suppliers from Brazil were withholding offers given their limited inventory for January shipments and uncertainties in the upstream biodiesel market before the country’s bimonthly biodiesel auction result is released in next week.

Brazil, Argentina and southeast Asia are major suppliers of crude glycerine – a by-product of biodiesel – into China.

Some traders and brokers were eyeing Brazil’s 40th biodiesel auction, which has approved 42 producers to participate. The auction is for biodiesel supply for domestic usage for the months of January and February 2015, with the results expected to be released in the week of 19 December.

One major distributor based in Brazil said it is selective on pricing and customers as inventory pressure has eased since its rival in crude glycerine exports – Argentina – has withdrawn from the key Chinese market, where prices have been falling over the past two to three months.

Crude glycerine prices in China were very near Argentina’s production cost, industry sources said.

A weak crude oil market has made biodiesel production less competitive, and with no government subsidies, biodiesel producers would have difficulty surviving in the current market, they said.

Falling crude prices have affected the viability of biodiesel used as fuel, with several Latin American and southeast Asian market participants expecting production to be reduced, to minimise losses in the upcoming quarter.

Refiners and other buyers of crude glycerine need to ensure they have sufficient inventory in February or March and this could mean upward pressure in the near term, the trader said.

“But in [the] longer term, higher prices will be difficult since the downstream situation in refined glycerine and its derivative sector has yet to improve this year,” he said.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections