MARKET DEVELOPMENT
OUTLOOK ’15: Less Volatile 2015 Expected for Oleochemical Markets
OUTLOOK ’15: Less Volatile 2015 Expected for Oleochemical Markets
26/12/2014 (ICIS) - The global glycerine industry is closely watching the fate of the highly politicized US, Indonesian and Argentine biodiesel industries as a gauge for what 2015 holds in store.
The key question looking at 2015 glycerine pricing and trends is what will happen with the global biodiesel sector and its supply of by-product crude glycerine and, when or if, the worldwide glycerine markets will tighten up.
Some players in the refined glycerine market expect the market to tighten slowly sometime in the second or third quarters. However, other players say the supply scenario would also depend on global economics and will ultimately depend on demand.
The US biodiesel fate is still unclear heading into the new year.
With the retroactive renewal of the US $1/gal tax credit, many in the sector are concerned that the extension for 2014 year leaves the industry in uncertainty again looking to 2015.
“While we greatly appreciate the retroactive extension of these tax credits that are vital to the production of cleaner-burning advanced biofuels for 2014, in only a matter of days they will lapse once again,” stated Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw.
Additionally, the sector remains in flux after the US Environmental Protection Agency (EPA) announced it would not be finalizing the 2014 Renewable Volume Obligation (RVO) requirements by the end of the year.
"This Administration says over and over that it supports biodiesel, yet its actions with these repeated delays are undermining the industry,” the National Biodiesel Board (NBB) said.
The EPA delay will also affect the compliance deadline for 2013, which will be moved into 2015. Additionally, the agency will modify the system used to track renewable identification numbers (RINs) to ensure RINs generated in 2012 are valid for determining 2013 standards, the EPA said.
The Indonesian sector is poised to grow in 2015, but its effects on the global oleochemical balance are still unknown
Biodiesel demand in Indonesia is projected to grow almost five fold to 16.2m kilolitres (kl) in 2020 from around 3.4m kl in 2014, in line with a government program that aims to expand the use of green fuel beyond the transportation sector.
The Indonesian government last year raised the required biodiesel blend in industrial fuel to 10% from 7.5% previously.
By 2025, the country is targeting a biodiesel blend of 25% for the transportation and industrial sectors, and this is expected to boost oleochemicals production in the country, Indonesian Palm Oil Board chairman Derom Bangun said earlier this year.
Meanwhile, Argentine biodiesel production is less uncertain as the sector has found new business to replace lost European markets and producers only cut production if margins are poor.
During the final weeks of 2014 Argentine producers cut back production amid sagging margins with some opting to take advantage of the downturn and perform maintenance.
US fatty acids sector expects better feedstock availability
US tallow and other grease prices are expected to be more available in 2015 because of feedstock choices available for multi-feedstock biodiesel production.
A large fatty acid producer said other feedstock options would take the pressure off tallow prices in 2015.
US tallow-based fatty acid producers typically use bleachable fancy tallow (BFT) as feedstock which is derived from cattle slaughter.
However, slaughter rates in the US have been down by over 5% all year long and supply has seen some tight spots.
US fatty alcohols likely to see less volatile 2015
The US fatty alcohol market is likely to see a less volatile 2015 than what was experienced in 2014.
Reasons behind this lie mainly in two areas: a market correction took place in 2014 and is largely completed and the effects of last year’s typhoon on the coconut oil (CNO) sector are abating.
US contract prices fell sharply in the third and fourth quarters of 2014, with the fourth quarter mid cuts losing about 14-17 cents/lb across the range to a 78-93 cents/lb assessment.
That assessment remains under downward pressure going into 2015, but the degree of that pressure is no longer in double-digits.
Oversupply dominated the 2014 fatty alcohol market as Asian production capacity increased alongside moderating palm kernel oil (PKO) pricing in that region.
US buyers held the oversupplied situation to its fullest, driving mid cut contracts into the market correction that has largely rectified suppliers’ strong increases in 2012 and 2013.
The 2013 typhoon that wrought disaster in Asia destroyed a significant portion of the coconut crop in the key growing area of the Philippines.
With the coconut fruits widely damaged, the premium of CNO prices to PKO prices soared, causing increased volatility throughout the oilseed markets during 2014.
That situation is moderated at the end of December and expected to remain so and display additional improvement in 2015 as the coconut crops are refreshed.
However, another ameliorating factor is that more palm is being planted and more PKO being used as the market coped with the 2014 reduction in CNO.
Going into 2015, the increase in PKO use is also moderating the price level and adding another stabilising factor for the first quarter.
The key question looking at 2015 glycerine pricing and trends is what will happen with the global biodiesel sector and its supply of by-product crude glycerine and, when or if, the worldwide glycerine markets will tighten up.
Some players in the refined glycerine market expect the market to tighten slowly sometime in the second or third quarters. However, other players say the supply scenario would also depend on global economics and will ultimately depend on demand.
The US biodiesel fate is still unclear heading into the new year.
With the retroactive renewal of the US $1/gal tax credit, many in the sector are concerned that the extension for 2014 year leaves the industry in uncertainty again looking to 2015.
“While we greatly appreciate the retroactive extension of these tax credits that are vital to the production of cleaner-burning advanced biofuels for 2014, in only a matter of days they will lapse once again,” stated Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw.
Additionally, the sector remains in flux after the US Environmental Protection Agency (EPA) announced it would not be finalizing the 2014 Renewable Volume Obligation (RVO) requirements by the end of the year.
"This Administration says over and over that it supports biodiesel, yet its actions with these repeated delays are undermining the industry,” the National Biodiesel Board (NBB) said.
The EPA delay will also affect the compliance deadline for 2013, which will be moved into 2015. Additionally, the agency will modify the system used to track renewable identification numbers (RINs) to ensure RINs generated in 2012 are valid for determining 2013 standards, the EPA said.
The Indonesian sector is poised to grow in 2015, but its effects on the global oleochemical balance are still unknown
Biodiesel demand in Indonesia is projected to grow almost five fold to 16.2m kilolitres (kl) in 2020 from around 3.4m kl in 2014, in line with a government program that aims to expand the use of green fuel beyond the transportation sector.
The Indonesian government last year raised the required biodiesel blend in industrial fuel to 10% from 7.5% previously.
By 2025, the country is targeting a biodiesel blend of 25% for the transportation and industrial sectors, and this is expected to boost oleochemicals production in the country, Indonesian Palm Oil Board chairman Derom Bangun said earlier this year.
Meanwhile, Argentine biodiesel production is less uncertain as the sector has found new business to replace lost European markets and producers only cut production if margins are poor.
During the final weeks of 2014 Argentine producers cut back production amid sagging margins with some opting to take advantage of the downturn and perform maintenance.
US fatty acids sector expects better feedstock availability
US tallow and other grease prices are expected to be more available in 2015 because of feedstock choices available for multi-feedstock biodiesel production.
A large fatty acid producer said other feedstock options would take the pressure off tallow prices in 2015.
US tallow-based fatty acid producers typically use bleachable fancy tallow (BFT) as feedstock which is derived from cattle slaughter.
However, slaughter rates in the US have been down by over 5% all year long and supply has seen some tight spots.
US fatty alcohols likely to see less volatile 2015
The US fatty alcohol market is likely to see a less volatile 2015 than what was experienced in 2014.
Reasons behind this lie mainly in two areas: a market correction took place in 2014 and is largely completed and the effects of last year’s typhoon on the coconut oil (CNO) sector are abating.
US contract prices fell sharply in the third and fourth quarters of 2014, with the fourth quarter mid cuts losing about 14-17 cents/lb across the range to a 78-93 cents/lb assessment.
That assessment remains under downward pressure going into 2015, but the degree of that pressure is no longer in double-digits.
Oversupply dominated the 2014 fatty alcohol market as Asian production capacity increased alongside moderating palm kernel oil (PKO) pricing in that region.
US buyers held the oversupplied situation to its fullest, driving mid cut contracts into the market correction that has largely rectified suppliers’ strong increases in 2012 and 2013.
The 2013 typhoon that wrought disaster in Asia destroyed a significant portion of the coconut crop in the key growing area of the Philippines.
With the coconut fruits widely damaged, the premium of CNO prices to PKO prices soared, causing increased volatility throughout the oilseed markets during 2014.
That situation is moderated at the end of December and expected to remain so and display additional improvement in 2015 as the coconut crops are refreshed.
However, another ameliorating factor is that more palm is being planted and more PKO being used as the market coped with the 2014 reduction in CNO.
Going into 2015, the increase in PKO use is also moderating the price level and adding another stabilising factor for the first quarter.