LITTLE FALLS, NJ, July 25, 2006 – Manufacturers of synthetic glycerin are getting a hard lesson in the economics of supply and demand as prices for their products plummet, driven down by an overabundance of glycerin on the market. In fact, glycerin prices have dropped by two-thirds in the last five years and are expected to drop even further, approaching zero. The reason? The biodiesel boom.
Glycerin is a key byproduct of the biodiesel production process, and the growth in biodiesel production has flooded the market with natural glycerin. This surplus, and the resulting low prices, has left glycerin producers wondering just how low prices will go and how they will compete in a market where their former cash cow has now become a byproduct.
To find out, Kline & Company is launching a new study to examine the biodiesel boom and the ripple effect it is having on the crude glycerin market. The study, GLOBAL BUSINESS OPPORTUNITIES IN BIODIESEL FUELS, 2006-2016, will provide a comprehensive analysis of the global market for biodiesel, including manufacturing cost economics such as the glycerin factor.
“Glycerin producers are very concerned about what the biodiesel boom is doing to their profit margins,” says Geeta Agashe, director of the Petroleum & Energy practice for Kline’s research division. “Biodiesel producers have now become serious competitors in the glycerin market by selling a byproduct that they could just give away. If they can sell it, the economics of new biodiesel projects look even better, which could further boost the number of new facilities that come online.”
Biodiesel production, driven by tax incentives and environmental pressures around the world, is already expected to grow by 15 to 20 percent each year over the next five years. Kline’s study will examine the opportunities and threats that this steep growth presents for both biodiesel feedstock suppliers and producers.
The results of the study are also crucial for glycerin suppliers who need to understand how the biodiesel boom will affect their own market. Natural glycerin supply had gone through cycles in the past, with major synthetic glycerin suppliers such as Dow and Solvay leading the way in glycerin production for the pharmaceuticals, cosmetics and toiletries industries. But recently, Dow has shut down its plant in the U.S. and may close one in Germany because of the surplus of natural glycerin flooding the market.
For glycerin suppliers, innovation may be the only way to survive, leaving many with no choice but to investigate new applications for their product.
“With the rise in biodiesel production expected over the next few years, glycerin producers stand to lose the most in this scenario unless they can develop new applications that may help stabilize the market,” says Bill Downey, vice president and head of Kline’s Petroleum & Energy consulting practice. “Not every biodiesel plant is big enough to justify the capability to upgrade the crude glycerin, but the right-sized biodiesel suppliers will win with more feasible project economics based on the sale of a byproduct that would otherwise be discarded.”
Kline will launch GLOBAL BUSINESS OPPORTUNITIES IN BIODIESEL FUELS, 2006-2016 next month using 2006 as the base year for supply and demand data, with projections for 2011 and a forecast to the year 2016.
For more information on this study, go to www.klinegroup.com/reports/y626.htm or contact Geeta Agashe at +1-973-435-3484. In Europe, contact Pilar Pardo at +32 2 776 0737.
To learn more about Kline’s customized consulting capabilities in the petroleum and energy fields, contact Bill Downey at +1-973-435-3388.
Established in 1959, Kline & Company (www.klinegroup.com) is an international business consulting and market research firm serving the petroleum and energy, specialty chemicals, life sciences, and consumer products industries.
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