US spot glycerine approaches floor as market eyes biodiesel production

HOUSTON (ICIS)–US spot glycerine prices are likely approaching a floor, as players closely monitor domestic biodiesel production over the coming months and EU-proposed anti-subsidies on Indonesian biodiesel.

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Market conditions in the spot kosher crude and refined glycerine markets have been bearish since late April 2018 amid strong biodiesel and oleochemical production alongside steady imports from southeast Asia, a major exporter to the US.

Most biodiesel plants produce crude glycerine at a 1:10 ratio, while additional costs have to be incurred to process the product into refined glycerine for higher value applications.

Oleochemical production has also been strong amid healthy growth in personal care and food and beverage markets, among others.

However, signals that biodiesel producers are closely approaching the federal mandate for biodiesel production has led to a slight uptick in demand for September kosher crude glycerine.

Market participants said the market has approached nearly 75% of the 2019 renewable fuel standard mandate, signalling an eventual slowdown in biodiesel production, especially at non-integrated small- and medium-sized producers.

If the federal $/gal tax credit is not reinstated during the third quarter and producers meet the federal mandate, biodiesel production will likely rationalise and tighten crude markets in the fourth quarter and into next year.

Moreover, tensions surrounding the European Commission-proposed anti-subsidies of 8-18% on Indonesian biodiesel imports could lead Indonesian producers to rationalise production.

Provisional measures are expected to take force at the beginning of September, with definitive measures set for mid-December.

A US source also said that historically Indonesia has decreased production after duties have been placed on biodiesel from the country.

This would reduce the production of by-product glycerine, which could limit the amount of material available for import into the US.

This combination of factors has already led to an uptick in demand for September kosher crude glycerine.

Market players are likely to take a wait-and-see approach pending further data on US biodiesel production and the fallout of the EU anti-subsidies towards Indonesia.

Glycerine is mainly used in personal and oral care products such as skincare creams, toothpastes and mouthwashes, as well as food products either as glycerine directly or one of its derivatives such as glycerol mono-stearate.

Focus article by Lucas Hall