US crude glycerine prices could dip as spring nears

HOUSTON (ICIS)–Biodiesel–derived 80% crude glycerine prices could decline in coming weeks as de-icing buyers exit the market with spring temperature forecasts and biodiesel production restarting.

Seasonal buyers from the de-icing markets generally take some length out of the market every year usually from the fourth quarter through the first quarter as they buy large volumes ahead of the winter season.

A buyer expects 80% crude glycerine prices will begin to decline in 2H March as biodiesel production will slowly increase and the freeze conditioning buyers “will hit the brakes in the middle of March. They do every year”.

Photo by Martin Siepmann/imageBROKER/REX/Shutterstock (9380574a)

“When they get out of the market it’s like three people exiting a four-person hot tub,” the buyer said. “The water level goes down real quick,” the buyer said.

Biodiesel ramp up

The speed of rising biodiesel production is another factor for crude glycerine supply and could ease or exacerbate current supply snugness.

Biodiesel production generally slows at the start of the year, but biodiesel producers said the lack of a tax credit for 2018 will slow the restart of production until March or even April.

Late last week, US biodiesel market players were disappointed after a proposed budget deal included a one-year retroactive reinstatement of a biodiesel credit and not the two-year extension sought by the biofuels industry.

The US Senate and House of Representatives late last Thursday voted on the package that would avert a government shutdown. Part of the deal package included the $1/gal credit given to biodiesel blenders retroactively for 2017.

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

A wild card in the equation is Chinese crude glycerine demand for their epichlorohydrin (ECH) production.

Since the third quarter of 2017 the US market has seen increased demand from Chinese buyers trying to source crude glycerine following environmental crackdowns in the petrochemical industry in China and rising crude oil prices.

The Chinese market is known for glycol-based ECH production, the buyer said. “What got the ball rolling on that was two of the five glycol-based ECH producers went offline in China, while the other three pushed prices up, which put everything in motion,” the crude glycerine buyer said.

The recent uptick in petroleum crude prices since the fourth quarter of 2017 will also put upward pressure on ECH pricing, which could promote crude glycerine purchases as an economical substitute for the petrochemical ECH route, the source said.

Price levels of US 80% spot crude glycerine this week were heard hovering between 9-10 cents/lb ($198-220/tonne) FOB (free on board) Midwest.