Glycerin is a byproduct of the industrial soap manufacturing process (saponification). Modern soap manufacturers use fatty acids and sodium hydroxide as an input. Fatty acids for soap are manufactured through the process of hydrolysis (fat splitting). The process separates the lipid source, either animal fat or vegetable oil, into water, fatty acids, and glycerin. The glycerin is then removed from the water and fatty acids (sweet water) and is often processed into refined glycerin. This is why much of the glycerin refining capacity is owned by soap manufacturers such as Dial, Proctor & Gamble, and Lever.
The production of fatty acids and biodiesel is a similar process. Both processes can use either animal fat or vegetable oil as an input; both produce glycerin as a byproduct.
Glycerin has traditionally provided consistent revenues to soap and fatty acid producers. These revenues are now fractions of previous years’ since global biodiesel production has flooded the market with glycerin.
Biodiesel production, boosted by subsidies and tax breaks, has squeezed soap and fatty acid producers on input costs and byproduct revenues. The domestic soap industry has remained competitive in the past by using beef tallow as a feedstock. Meanwhile, biodiesel makers with multiple feedstock capability use as much animal fat as possible to combat high vegetable oil prices. This has driven up the price for beef tallow, which has, in turn, led soap manufacturers to begin importing foreign plant-based oils for feedstock.
Global biodiesel production will determine the future of the glycerin industry. Demand for biodiesel is projected to be 8 billion gallons by 2020. This would result in 5.8 billion pounds of glycerin entering the market from biodiesel production alone.
As per the United States Energy Information Agency website, U.S. production of biodiesel was 128 million gallons in July 2013. This was an increase from production of 113 million gallons in June 2013. Biodiesel production from the Midwest region (Petroleum Administration for Defense District 2) was 64% of the U.S. total. Production came from 111 biodiesel plants with operable capaicity of 2.1 billion gallons per year. It is uncertain whether future biodiesel production will meet projections. Policymakers have set optimistic renewable fuel goals and mandates which may not become a reality. Feedstocks for biodiesel companies have become expensive that generous subsidies still do not enable biodiesel to be competitive with petroleum-based diesel. Biodiesel production may be lower than projected in the future; therefore, there will be less glycerin than expected. Although biodiesel production may not meet future projections, it is expected to increase well into the future and further exacerbate the crude glycerin glut. It will be in the best interest of biodiesel producers across the world to find a solution for crude glycerin prices which can add more value and profitability to their biodiesel operations.
The domestic glycerin refinery capacity is slightly below 500 million pounds of refined glycerin annually. However, this is not large enough to refine all of the crude glycerin produced in the United States because the demand for refined glycerin has not kept pace with the recent surge in crude supply.
Glycerin is refined in the United States by only a few companies. The largest producers include Proctor & Gamble, Dial, and Cognis, which are all major players in the global chemical market. All domestic refiners currently refine natural glycerin only.
