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Glycerine Market Report IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII

December 2017 / N°119 iiiiiiiiii iiiiiiiiii

The Market Intelligence to Sharpen Your Performance A quarterly publication of the

Group since 1986

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Glycerine Market Report

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Background Note:

®

Oleoline is a registered trademark which belongs to HB International SAS (HBI). HBI is a brokerage house specialized in oleochemicals with offices in Europe, China, India, Singapore, North America and South America: www.hbint.com HBI is an acknowledged specialist of the global glycerine market and has organized and chaired 4 Global Glycerine Conferences in the past. As brokers, HBI sold over 380,000 mt of glycerine worldwide in 2016, including important volumes in both China and the USA. This wide operational reach is unique in the glycerine market and provides a fundamental understanding of the mechanics of this global commodity. These credentials enable HBI and Oleoline to present a comprehensive, objective and knowledgeable ® analysis of the global glycerine market. The "Oleoline Glycerine Market Report" has been published since 1986. This Report is subscribed to and recognized as an industry reference by most of the major market players in the glycerine market.

OLEOLINE Limited Room 1906, 19/F, Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong

Violation of copyright is an offence. Any distribution, copying or other unauthorized use ® of any notices: part of the report without Oleoline 's express agreement is a copyright violation. Important Infringers will be prosecuted. The information contained in this report is a result of our knowledge of the market, as well as being obtained from sources considered to be reliable. Every care has been taken to ensure its accuracy. The quotations in this report are averages of price ranges pertaining to the market during the period reported. They are based on bids, offers and trades heard in the market or handled by our sister company HBI during the period concerned, and we believe them to be representative of market levels. However, Oleoline® cannot accept responsibility for the information contained in this report, nor for our prognoses and opinions.

You are welcome to give us your feedback: [email protected]

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1/ Summary ....................................................................................................................................................................................... 2 2/ Glycerine Markets by Geography.......................................................................................................... 4 2.1 The US glycerine market ............................................................................................................................................................ 4 2.2 The European glycerine market ............................................................................................................................................. 13 2.3 The Chinese glycerine market ................................................................................................................................................ 21 2.4 The South-East Asian glycerine market ........................................................................................................................... 26 2.5 The South-American glycerine market .............................................................................................................................. 28

3/ Prognosis...................................................................................................................................................................................... 30

CONTENTS OF TABLES AND GRAPHS

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1/iiiiiiiiii Summary TABLE I GRAPH I

Short term view of glycerine prices, September 2017 to mid-2018.................................................................. 2 USA & European spot prices for 99.7% kosher glycerine delivered customer in bulk, 1995-2017...... 3

2/ Glycerine Markets by Geography GRAPH II TABLE II TABLE III TABLE IV GRAPH III TABLE V GRAPH IV TABLE VI TABLE VII GRAPH V GRAPH VI GRAPH VII GRAPH VIII TABLE VIII GRAPH IX TABLE IX TABLE X GRAPH X

Evolution of the US glycerine market, 1995-2017 ................................................................................ 4 USA production of glycerine, 1995-2017 .............................................................................................. 6 USA consumption of glycerine, 1995-2017 .......................................................................................... 8 USA imports of glycerine, 1995-2017 ................................................................................................... 9 Crude and refined glycerine stocks USA, 1995-2017 .......................................................................... 10 USA spot price of kosher quality refined glycerine, 1995-2017 ........................................................... 11 European production, imports, exports and consumption of glycerine, 1995-2017 ............................. 13 European production of glycerine, 1995-2017 ..................................................................................... 15 European consumption of domestically supplied glycerine, 1997-2017 .............................................. 17 European crude and refined glycerine producers’ stocks, 1995-2017 ................................................. 19 European spot price of kosher and technical refined glycerine, 2001-2017 ........................................ 20 Monthly volumes of crude glycerine imports into China, 2016-2017 .................................................... 21 Imports of refined and crude glycerine in China, 2008-2017................................................................ 22 Estimated Chinese domestic production, imports and consumption of glycerine, 2006-2017 ............. 23 Crude glycerine prices CIF China main ports, 2005-2017 ................................................................... 24 Refined glycerine spot prices in China, 2008-2017 .............................................................................. 25 FOB Malaysian/Indonesian prices of kosher refined glycerine, 2008-2017 ......................................... 27 Crude glycerine prices in USD pmt FOB South America, 2014-2017 .................................................. 29

3/ Prognosis TABLE XI TABLE XII

Global biodiesel production, 2015-2017 ............................................................................................... 30 Short, medium and long-term forecasts for glycerine prices, 2017-2018 ............................................. 32

1/ SUMMARY TABLE I

Short Term View of Glycerine Prices December 2017 to mid-2018

PRODUCT

USA December 2017

Europe December 2017

Est. for USA Mid-2018

Est. for Europe Mid-2018

99.7% kosher quality refined glycerine spot price

USD 48 c/lb.

EUR 900 pmt

USD 47 c/lb.

EUR 700 pmt

99.5% technical quality refined glycerine spot price

USD 42 c/lb.

EUR 800 pmt

USD 40 c/lb.

EUR 600 pmt

EUR 475 pmt EUR 200 pmt

USD 17 c/lb. USD 4 c/lb.

EUR 350 pmt EUR 175 pmt

80% crude glycerine spot price for refining for disposal

USD 18 c/lb. USD 5 c/lb.

NB: Spot prices are defined as an average level of sales made during the captioned month in bulk, delivered customer. Estimates based on exchange rate: € 1 = $ 1.17

The evolution of the 2017 glycerine market has taken pundits aback, and only recently is a sufficiently clear picture of what has happened beginning to emerge. The remains of the heat from El Niño continued to sear the competitiveness of palm-based products and diminish glycerine generation. Biodiesel production in Asia has been especially disappointing in 2017. By coincidence the Chinese production of propylene-based epichlorohydrin (ECH) has been gradually shut down, simultaneously pushing up prices of ECH and demand for glycerine in China because ECH is now produced predominantly via the glycerien-to-ECH route. With little availability of glycerine out of Malaysia and Indonesia, Chinese importers have dried up inventories in South America and in Europe, a phenomenon largely described in the previous edition of this Quarterly market report. The biodiesel anti-dumping drama injected a heavy dose of confusion in biodiesel markets and has left many producers in Europe and Argentina assuming that they would have very little sales for the second half of the year, and therefore poor generation of glycerine. Such duties should theoretically have no effect on the overall supply of glycerine, since they merely displace generation from Europe to Argentina for instance. Unexpectedly, these duties caused both South American and European sellers to temporarily withdraw from the glycerine market. The third important aspect of 2017 has been the evolution of stocks, which directly influence prices. In normal circumstances, underestimating sales of biodiesel would lead to a trend of lower glycerine prices as biodiesel producers have limited storage capacities for glycerine. The opposite happened in 2017. The Argentine market has prepared for a difficult year and has built up defensive stocks of glycerine. Strong demand from China, even at higher prices than what the market had been able to absorb in similar conditions in previous years, vacuumed all extra volumes of by-product and inventory levels have only started rising very recently. The global economy is on a strong run and demand for glycerine is buoyant even at the high values seen over the past months. Low prices contracted during the end of 2016 and in the first half of 2017 would have given glycerine traders and end users a buffer in profit to afford paying the much higher prices that were on offer for the second half of the year and still have a tidy bottom line for the exercise. Graph I on the next page illustrates the evolution of refined glycerine prices in the USA and in Europe since 1995 and shows how contrary to previous spikes in glycerine prices, the market levels have consolidated at high levels in the current cycle.

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December 2017 Oleoline Glycerine Market Report / Issue N° 119

GRAPH I

USA and European Spot Prices for 99.7% Kosher Glycerine Delivered Customer in Bulk, 1995 – 2017

EUR/t European market

c/lb USA market

120

1 800 1 600

100 1 400 80

1 200 1 000

60 800

40

600 400

20 200 0

Dec 95 Jun 96 Dec 96 Jun 97 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 June 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Apr 10 Sep 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17

0

USA - c/lb

Europe - €/t

Source: HBI

This issue of the “Oleoline Glycerine Market Report” will review the state of each geographic market, including a new section on Argentina and Brazil, in order to assess whether the price gains of the glycerine market during the last months are sustainable.

December 2017 Oleoline Glycerine Market Report / Issue N° 119

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