Business trends

 12 May 2015 04:46 Source:ICIS News

Focus article by Alexis Gan

SINGAPORE (ICIS)--Spot glycerine prices in Asia may be under pressure given buyers’ expectations that supply will lengthen as a direct result of Indonesia’s new biodiesel policy, industry sources said on Tuesday.

Refined glycerine were mostly offered at $700-750/tonne FOB (freight on board) SE (southeast) Asia, this week, they said.

On 6 May, refined glycerine prices were assessed at $680-730/tonne FOB (freight on board) SE (southeast) Asia, down by $10/tonne at the high end of the range from the previous week, according to ICIS.

Demand was slower than expected in the month of April as buyers are wary of procuring too much cargoes amid the overall weakness in the global economy, market sources said.

Supply, on the other hand, is expected to grow in Indonesia, one of the largest glycerine producers in Asia, when the country implements its export levies of $50/tonne on crude palm oil and $30/tonne on processed palm oil products late this month.

Proceeds from the new tax measure will subsidise Indonesia's biodiesel production, as well as other research and development projects related to the industry.

Supply of crude glycerine –  a by-product of biodiesel production – is expected to increase once Indonesian’s biodiesel production ramps up with support from the government’s subsidy, industry sources said.

Import price discussions for crude glycerine into China, however, were mostly unchanged at $310-320/tonne CIF (cost, insurance and freight) CMP (China Main Port) in the week ended 6 May, as suitable spot materials remain limited, while its major supplier Brazil has refused to lower offers in the week.

Global biodiesel production has remained at a standstill since the price slump in crude oil and its derivatives from the second half of last year.

EU's decision in late April to limit the food crop-based methyl ester blend of diesel to 7% from the initial 10% is expected to hit the region's main suppliers, including Argentina, Indonesia and Malaysia, industry sources said.

In southeast Asia, crude glycerine is typically processed further to higher value product with a minimum purity of 99.5% USP (US Pharmacopeia ) grade for nearly two thousand applications in – food, pharmaceuticals, personal care, cosmetic, tobacco industry.

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

Currently, the bulk or 60-70% of refined glycerine output in Asia is derived through the biodiesel production route, while the rest is generated as a by-product of fatty acids/alcohols production.

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

By Alexis Gan