[Introduction] Glycerin prices showed a resilient "three ups and three downs" trend in the third quarter. Prices of 99.5% refined glycerin in East China rose by nearly 30%, reaching a three-year high. Foreign price increases and tight supply were the main factors. Looking ahead to the fourth quarter, supply constraints may ease, while demand is limited by seasonal factors and low downstream production capacity. Prices are expected to consolidate at a high level before a narrow decline, possibly in line with seasonal trends.
"Three Ups and Three Downs" Shows Resilience: Glycerin Price Increases Expand in the Third Quarter, Reaching a Three-Year High
Glycerin prices fluctuated upward in the third quarter, showing a "three ups and three downs" trend. For example, 99.5% refined glycerin in East China peaked at 9,600 yuan/ton in mid-September and bottomed at 7,350 yuan/ton on July 1, the beginning of the third quarter. The high-low price spread was 2,250 yuan/ton, with a fluctuation of 30.61%, approximately 11 percentage points higher than in the second quarter. As of September 30th, the price of 99.5% refined glycerin in East China closed at 9,450 yuan/ton, up 2,175 yuan/ton, or 29.90%, from 7,275 yuan/ton on June 30th.
In terms of price trends, the third quarter showed a widening increase, narrowing declines, and a longer period of price fluctuations compared to previous periods.
The main reasons for the increase in glycerin prices in the third quarter were: 1. Rising overseas prices strengthened domestic glycerin cost support, leading to price increases by domestic glycerin manufacturers; 2. A temporary shortage of domestic circulated supply and a scarcity of high-quality supplies boosted glycerin prices; 3. Rising prices for epichlorohydrin, a major downstream product, boosted market sentiment in the glycerin market. The decline in glycerin prices in the third quarter was primarily due to a weakening downstream willingness to accept glycerin after prices reached a temporary high. Insufficient demand led some glycerin manufacturers to reduce prices, leading to a price correction.
Costs are driving up glycerin prices, and the tight supply situation may improve in the fourth quarter.
From the raw material perspective, crude glycerin prices continued their upward trend in the third quarter. The crude glycerin market is in tight supply. Since Indonesia imposed tariffs on crude glycerin exports in mid-May, companies have preferred to refine and process refined glycerin for export. This has reduced the available crude glycerin supply, and manufacturers are reluctant to sell at higher prices. Domestic buyers are buying due to strong demand, pushing up crude glycerin market prices and increasing domestic glycerin refining costs. On September 30, the CIF China price of 80% crude glycerin closed at $795/ton, up $197.5/ton, or 33.05%, from $597.5/ton at the end of the second quarter.
From the cost perspective, the overseas price of refined glycerin rose in the third quarter, increasing domestic glycerin costs. With the imminent implementation of US tariffs from June to August, Southeast Asian glycerin manufacturers are increasing their supply to the US. From August to September, increased stocking demand in Europe is driving increased Southeast Asian supply to Europe, reducing supply available to China. Southeast Asian glycerin manufacturers are primarily selling futures contracts one to two months out, reducing shipping pressure and boosting price support. Domestic buyers are purchasing on an urgent basis, driving prices upward and strengthening domestic glycerin cost support. As of September 30, the CIF China price of industrial-grade 99.5% refined glycerin closed at $1,170/ton, up $260/ton, or 28.57%, from $910/ton at the end of the second quarter.
From the supply side, Southeast Asian glycerin manufacturers are primarily selling supply for delivery after November, and with overseas prices remaining at a three-year high, costs are expected to remain supportive in the fourth quarter.
Epichlorohydrin saw both profitability and production capacity improve in the third quarter, but demand growth is limited in the fourth quarter.
From the perspective of major downstream epichlorohydrin prices, prices fluctuated upward in the third quarter due to rising raw material glycerin prices, stronger cost support, and temporarily tight market supply. As of September 30, the price of epichlorohydrin in East China closed at 12,575 yuan/ton, up 2,750 yuan/ton or 27.99% from 9,825 yuan/ton at the end of the second quarter. The rising price of epichlorohydrin boosted sentiment among glycerin producers, further boosting glycerin prices.
From a profitability perspective, despite the increased price of epichlorohydrin, the theoretical gross profit margin of epichlorohydrin produced by the glycerin process has been in the red for most of the time. For example, in the East China market, the average theoretical gross profit margin was -380 yuan/ton in the second quarter and -163 yuan/ton in the third quarter, reflecting a significant reduction in losses. Regarding the operating levels of glycerin-based epichlorohydrin production, the average weekly operating rate in the third quarter was 37%, a 2 percentage point increase from 35% in the second quarter.
From the demand side, epichlorohydrin prices are currently around the cost line of the glycerin-based process, leaving limited profit margins. It is expected that the operating rate of glycerin-based epichlorohydrin plants will remain low in the fourth quarter, and the potential for demand growth may be limited. Epichlorohydrin demand is expected to decline in the fourth quarter, and this price support for glycerin prices may weaken.
The supply-demand dynamics continue, and prices are expected to fall after consolidating at high levels.
Glycerin prices tend to decline in the fourth quarter of previous years, as temperatures drop, demand gradually weakens, and the monthly average price often turns from rising to falling. This year, from the demand side, terminal demand is expected to weaken in the fourth quarter, which will be bearish for glycerin prices, and prices may follow seasonal trends.
In summary, cost support is likely to remain strong in the fourth quarter, while demand is relatively limited. The supply-demand dynamics in the glycerin market are expected to continue in the fourth quarter, with glycerin prices expected to consolidate at a high level before a limited decline. For example, the monthly average prices for 99.5% industrial-grade refined glycerin in East China are projected to be 9,550 yuan/ton, 9,200 yuan/ton, and 9,100 yuan/ton, respectively, from October to December.
Source: Zhuo Chuang Information