China crude glycerine downtrend to persist on weak demand

25 April 2014 07:10 Source:ICIS News

Focus story by Alexis Gan

China crude glycerine downtrend to persist on weak demandSINGAPORE (ICIS)--Crude glycerine prices in China may remain on a downtrend because of continued weakness in downstream demand, market sources said on Friday.

On 23 April, crude glycerine was assessed at $370-380/tonne CIF (cost, insurance and freight) CMP (China Main Port), down by $15/tonne from the previous week, according to ICIS.

Offers from Latin America and Europe (dutiable at 6% to China) were at around $380/tonne CIF CMP this week. For cargoes originating in southeast Asia that are non-dutiable, offers were at around $390/tonne CIF CMP for May shipments, market sources said.

Buyers, however, are not keen to procure cargoes with their current inventory at high levels because of poor performance in the downstream sectors since the start of the year, they said.

China imports crude glycerine with 80% purity to make refined glycerine, which is used mostly for industrial applications like epichlorohydrin (ECH).

The country also imports refined glycerine, which undergoes more extensive purification, for use in the food, pharmaceutical and cosmetic sectors.

“Many local traders sell crude glycerine at a loss, just to move more volumes,” a south China refiner commented.

A few major sellers from Latin America conceded that it is difficult to push for cargoes above $380/tonne CIF CMP now compared with two to three months ago.

“It's been very hard to achieve higher numbers. [The] Chinese claims local inventory [is] at comfortable levels,” one of the major sellers said.

A slowdown in China’s industrial sector, coupled with the depreciating Chinese yuan against US dollar, is at the root of poor demand in derivative end-applications, industry sources said.

Buying indications were largely being quoted at below $370/tonne CIF CMP, with sporadic transactions being made at these prices – mostly from Chinese traders facing inventory pressure, market sources said.

Local refineries are generally cautious, with buying strictly being made when there is an immediate requirement.

On the supply front, availability of crude glycerine from Brazil may decline in May and June, in view of the results of the country’s recent bimonthly biodiesel auction, industry sources said.

Crude glycerine is by-product of biodiesel. A thousand tonnes of biodiesel produced will yield 100 tonne of crude glycerine.

In Brazil's 36th biodiesel auction, 463.8m litres (122.5m gal) was sold, down from 549.6m litres in the previous auction, according to the country’s Oil, Natural Gas and Biofuels Agency.

Volume sales of crude glycerine from Brazil will be lower by 9,000 tonnes in May and June compared with March-April, according to a trader. This will reduce the amount of crude glycerine export volume to China, especially if prices remains unattractive.

But there are hopes that new policies in Thailand and Argentina would boost these countries' biodiesel production, consequently raising crude glycerine supply available to China, industry sources said.

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

By Alexis Gan