US glycerine prices set to skyrocket on low biodiesel production

Renewable Energy Group (REG): Glycerine huge output of biodiesel industry

As US biodiesel production grinds to a halt, prices may spike for glycerine – the chemical that goes into everything from toothpaste to polyols, sources said on Wednesday.

The biodiesel industry is the main source of crude glycerine, which is manufactured as a co-product of the renewable fuel. Now that biodiesel refiners are closing their doors amid a government delay in extending subsidies to the industry, crude glycerine production rates are approaching zero, market sources said.

Now that the biodiesel spigot is closed, glycerine refiners can expect to put up more money to acquire supply, said Daniel Oh, president of Renewable Energy Group (REG), the largest supplier of biodiesel in the US.

“Glycerine is obviously is a huge output of the biodiesel industry, and there is going to be an impact,” Oh said.

Another possible wrench in the works is coming from Archer Daniel Midland (ADM), which is expected to start its renewable propylene glycol (PG) plant sometime during the quarter. The plant, with a nameplate capacity of up to 125,000 tonnes/year, is expected to be a huge draw on US crude glycerine.

ADM did not immediately answer questions regarding the plant’s exact capacity or start-up date. A spokesman declined to comment on market conditions.

Overall US glycerine consumption is 40m lb/month (18m kg/month), while domestic production is 28m lb/month, according to industry statistics. Imports make up the difference.

Domestic glycerine sellers said prices could jump by as much as 10 cents/lb ($220/tonne or €154/tonne) in the next few months before suppliers in Asia and Europe – both regions awash with glycerine priced lower than in the US – decide to fill the breach.

“If ADM hits 100,000 tonnes/year, it will impact the domestic market in the short term until imports catch up,” said one large-volume glycerine buyer in the US. “The imports are there and will step up over the quarter.”

Vegetable glycerine spot prices were assessed at 21-23 cents/lb FD (free delivered) northwest Europe on 23 December, according to data from global chemical market intelligence service ICIS pricing. In Asia, vegetable glycerine was assessed at 23-25 cents/lb CFR (cost and freight) northeast China.

Even with shipping costs, that material from abroad could become more desirous if US glycerine values moves much higher than their current levels. Vegetable glycerine was assessed at 27-31 cents/lb FOB (free on board) midwest on 23 December.

“When that ADM machine turns on – if it’s well built and keeps running – it will be an interesting year,” a buyer said.

Major US refined glycerine producers include ADM, Proctor & Gamble, Cargill, Vantage Oleochems and VVF.


ICIS news, 2010-01-06.


Archer Daniels Midland Company (ADM)
Cargill, Inc.
Procter & Gamble
Renewable Energy Group (REG)