North American Oleochemicals Market Update June, 2021

The North American oleochemical market appears to be in continued imbalance with demand outpacing supply across many market sectors. The global and domestic transportation/logistics challenges, along with lower run rates in South East Asia, are being felt in the markets we serve.

Short chain (C8/C10) molecules into aviation lubricants and agrochemical applications have experienced growing demand with the U.S. getting back to traveling. Additionally, strong soybean and corn pricing is impacting the valuations of other vegetable feedstocks. I recently made my first business trip in ~15 months and experienced a flourishing Atlanta Hartsfield airport and fully utilized aircraft. It was reported that 7 million people passed through U.S. airports over Memorial Day weekend, the largest number of passengers since the pandemic began.

Demand for long chains (C16/C18) into personal care and cleansing remains robust. At the same time, demand into industrial applications is seeing a reemergence across the globe.

The glycerin market appears to be at an inflection point with Hydrogenated Vegetable Oil Green Diesel (HVO) competing with traditional Bio Diesel, not only for feedstock, but also for share of the Renewable Fuel Standard (RFS) for obligated parties. Unlike traditional Biodiesel, HVO does not generate crude glycerin. We are seeing this manifest itself in reduced availability of crude glycerin resulting in upward pricing pressure. I vividly remember first hearing of HVO Green Diesel at a trade show 5 years ago and it being described as a game changer reducing growth in crude glycerin generation. It feels as though 5 years later, the predication is here and will have a marked impact on the market going forward.

Furthermore, the force majeures in the gulf have impacted propylene glycol (PG) production driving price and demand for glycerin into PG.

Through the above market volatility, P&G Chemicals continues to deliver the Quality and Supply Assurance our customers have come to expect of us. We feel our long 180+ year history in Glycerin and our domestic Fatty Alcohol, Ester, and Acid footprint in Sacramento offer our customers a unique competitive advantage.

As the U.S. emerges from the pandemic and we get back to traveling, I look forward to seeing many of you face-to-face in the coming months.