Asia glycerine market faces supply concerns as Brazil lowers biodiesel mandate

Author: Jackie Wong

2020/08/17

SINGAPORE (ICIS)--The Asian glycerine market has new supply concerns as Brazil temporarily lowered its biodiesel blending mandate from B12 (12% blending ratio) to B10 for September and October due to a crunch in soybean supply.

The move is expected to significantly impact glycerine output from Latin America in the next two months.

ANP, Brazil's National Agency for Petroleum, Natural Gas and Biofuels, announced earlier that it will be dropping the mandatory biodiesel blend at gas stations from B12 to B10 for September and October after biodiesel producers voiced their concerns over the lack of soy oil availability.

Recent surge in demand for soybean from China meant that there were less materials available locally in Brazil for crushing.

Some biodiesel producers have earlier been turning to soy oil import in order to keep their production running.

In addition, ANP has also restarted the third phase of the country's 75th biodiesel auction to factor in the reduction.

The drop in biodiesel blending mandate is expected to lead to a lower glycerine output.

However, views on the possible impact on glycerine supply was mixed at the moment as market participants await the result of the biodiesel auction in Brazil.

Some Chinese traders said their Brazilian suppliers have stopped offering their cargoes due to the supply uncertainties.

Another glycerine trader in China said that its suppliers were still offering in the market, but at higher prices. "They've already increased their offers to $255/tonne CIF CMP last Friday."

Some believe that the reduction in glycerine supply may not be as significant as expected.

A trader in the Asia Pacific region said that even with the last part of the biodiesel auction being re-done, the difference in volume would just be less than 1%, which would translate to just a few thousand tonnes of glycerine.

"It might scare a few buyers in the market who don't understand this and sellers for sure will not be explaining the reality," the trader said. "Global demand is so poor that sellers are desperate for any way to change sentiment."

Last week, prices of crude glycerine cargoes going to China were assessed firmer at $235-245/tonne CIF (cost, insurance and freight) CMP (China main port), supported by lesser availability.

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Photo: An aerial photo made with a drone shows a farmer completing his soybean harvest in Illinois, the US. (TANNEN MAURY/EPA-EFE/Shutterstock)

Focus article by Jackie Wong