Glycerin

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Glycerin

Cost Drivers: As glycerine is a byproduct of the production of other products, its cost is principally driven by the demand for glycerine for its various uses the supply remains driven largely by the production of other products such as biodiesel fuels, soaps, fatty alcohols, and fatty acids.

Over the past few years the increasing use of biodiesel as a fuel in Europe, and increasing volumes in North America, has resulted in significant increases in the supply of byproduct glycerine globally, which has driven glycerine market pricing lower.

Current Forecast: Refined glycerine prices in the US have declined from roughly $0.70-0.80/lb. in late 2007 to $0.50-0.60/lb. in 2008 for tallow quality refined glycerine. Availability of material in the US (going to feed applications) and from Europe had increased significantly, loosening market pricing conditions.

More recently, given the weakening demand for oleochemicals, supply of glycerine has begun a decline. Similarly, reduced demand in Europe for diesel fuel along with high inventories have led to reduced production of biodiesel-based glycerine.
The impact of these supply declines results in a forecast for 2009 showing prices moving from the $0.35-0.40 cts./lb range in the first quarter up to $0.50-0.60 by yearend, and stabilizing into 2010
Glycerin spot prices reached a peak in the second quarter of 2008, with tallow material hitting a high of 80.5 cents/lb ($1,775/tonne) and vegetable glycerin posting $1.05/lb, according to global market intelligence service ICIS pricing. Prices then dropped continuously after supply/demand fundamentals skewed the market long.
China's third-quarter exit from the market started the downward trend. The absence of what was once the largest foreign buyer of US glycerin led to a glut of domestic material.
This was exacerbated as imports from Asia and Europe increased and the saturation of glycerin in the market caused US producers to cut spot prices repeatedly in an effort to clear their inventory.
Prices for tallow glycerin and vegetable glycerin, which made a rare convergence in October, are hovering at between 38-50 cents/lb. They will likely rise again and have their traditional 5 cent/lb spread reinstituted in 2009, according to buyers and sellers.

Contract prices for the first quarter of 2009 are expected to drop by nearly half to reflect the fourth-quarter fall in spot prices. The spot market could tighten in the first quarter of 2009, however, as domestic prices fall to a level that foreign suppliers may find unattractive and the US market sees an end to the seasonal fourth-quarter falloff in demand.

Clouding the picture is the ailing global economy, which has many market participants questioning how much orders can be expected to increase in the first quarter. But troubles in the US biodiesel market could cause suppliers there to close shop, potentially cutting supply of crude glycerin and adding upward pressure to refined glycerin pricing.