INSIGHT: Europe glycerine spot prices post triple-digit rises on fears of further biodiesel output cuts

Author: Samantha Wright

2020/04/03

LONDON (ICIS)--European glycerine spot prices faced triple digit increases this week as availability tightened significantly, with players concerned that upstream biodiesel production will fall further through the second quarter.

Refined vegetable glycerine prices shot up €130/tonne on the low end and €230/tonne on the high end to €670-900/tonne FD (free delivered) NWE (northwest Europe).

Availability of refined vegetable non-genetically modified origin (non-GMO) material tightened exponentially on the back of the significant decrease in biodiesel production in the region.

There was also talk that Oleon has announced a force majeure on all non-GMO glycerine, though there has been no confirmation from the company as of yet.

Refined tallow/technical vegetable glycerine values jumped up €100/tonne on the low end and €210/tonne on the high end to €500-670/tonne FD NWE.

Tallow and technical vegetable prices were also impacted by the limited supply on the back of upstream production cuts, though to a slightly lesser extent than refined vegetable prices.

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There is marginally more material available in the technical vegetable market due to imports noted in some cases from South America.

There is little to no material being imported from southeast Asia currently due to logistical issues moving material into Europe, as well as a lockdown in Malaysia forcing some oleochemical plants in the country to shut.

Any material that can leave southeast Asia bound for Europe will take at least 40 days to reach its destination, with players expecting tightness in the region for up to two months before extra material arrives.

Crude glycerine prices also saw a large increase this week, with values rocketing €150/tonne to €310-480/tonne FD NWE.

There is almost no material being seen in the crude glycerine market at the beginning of April.

The lack of demand for fuels in Europe, coupled with extremely low - and in some cases negative - margins has led biodiesel producers to cut and in some cases completely stop production.

Some players have already cut capacity by 50%, while there are several plants said to have shutdown for an unspecified amount of time.

Because glycerine is a by-product of biodiesel, a number of glycerine sellers have stopped all spot sales at the beginning of April in order to assess how much material will be available.

There is an unplanned shutdown at a Saipol biodiesel plant in France which has limited glycerine supply, but this is due to a fire at the unit rather than production cuts.

Glycerine can also be produced using fatty acids, however most market participants do not expect this method of glycerine production to increase significantly.

It is likely that biodiesel production in the region will remain reduced for most of the second quarter.

One glycerine seller said: “Why we hear it [has turned] so quickly is biodiesel producers don't have any off take for biodiesel right now. Demand has collapsed, there is no external storage space left in Europe.

“There are 30,000 tonne cargo vessels being rerouted into Europe from Asia because they can't dock there, and when they dock here they need to store it. So producers have to lower their utilisation rates in the plant because the customers have nowhere to put the product.”

There are still pockets of healthy supply in the region. One buyer said they had no issues securing material but that logistical issues are the real concern.

“I keep being told there is sufficient glycerine available. Even with all these new hand sanitiser plants and the requirements of washing hands putting some strain on glycerine, it’s still relatively low compared to other uses for glycerine.

“I am still being told there are enough stocks, but the main issue is logistics. There have been issues getting drivers, we are having issues getting it to the site.”

Even if countries do begin to resume normal operations during the summer months, rapeseed methyl ester (RME) production is likely to remain at low levels because it is typically a winter blend, with palm oil and soybean alternatives preferred in the summer.

A biodiesel tender in Brazil could lead to more glycerine supply available in the global market, though currently it is unclear if this material would be bound for Europe.

Demand remains good, with a slight increase seen in interest for use in sanitizer applications, though glycerine is a small component of most sanitizer products.

There has been a drop in demand for industrial applications, with the rubber and antifreeze industries taking a knock from falling automotive demand.

Players have noted a sharp increase in enquiries at the beginning of April, but this is mainly due to the limited supply of material in the market, rather than a substantial rise in actual demand.

Storage facilities in the region are getting full, and this could see a drop in demand from players who were trying to ensure they had full stocks going into the second quarter.

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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.

Front page picture: Personal care products, a key end market for glycerine 
Picture source: Jochen Tack/imageBROKER/Shutterstock 

Insight by Samantha Wright