Surging palm oil weighs on Asian biodiesel

28 May 2007 10:58  [Source: ICIS news]

SINGAPORE (ICIS news)--Crude palm oil (CPO) prices touched a fresh 9-year high on Monday casting a shadow on the viability of the Asian biodiesel industry, market sources said.

 

Strong food demand from countries like India and China, production shortfall in Malaysia and Indonesia, as well as speculative activity have pushed May futures above the ringgit (M$) 2,660/tonne ($784.7/tonne) level, a regional biodiesel producer said on Monday.

 

“Palm oil stocks are low and sellers are under no pressure to negotiate,” said another regional biodiesel producer. The situation may not change until July when the palm oil production season begins, he added.

 

Prices of refined, bleached and deodorised (RBD) olein are at $800/tonne FOB (free on board) Malaysia.

 

At these prices, biodiesel producers cannot sell at below $800/tonne FOB south east Asia (SE Asia) while buyers in Europe, the key consumer of biodiesel, are looking for $750/tonne FOB SE Asia, said a biodiesel seller.

 

Additionally B99, the subsidized biodiesel from the US is becoming a significant source of competition to Asian palm-based material. B99 from the US is available at $740-760/tonne CFR (cost and freight) to European buyers, he added.

 

Malaysian biodiesel producers are the worst hit in the current scenario, said a biodiesel seller. Malaysian product is subject to a 4.5% import tax in the US, whereas Indonesian product has no import tax either in the US or Europe, giving the sellers a little more flexibility.

 

Exports from Singapore, which has a few large biodiesel plants coming up this year including Peter Kremer’s 100,000 tonne/year and Natural Fuel’s 600,000 tonne/year plant, will also not be taxed in the US or Europe.

 

However, Singapore-based biodiesel plants would have to import palm oil from either Malaysia or Indonesia, increasing the raw material cost due to freight.

 

Much of the Asian biodiesel industry is struggling at present and operating at very low rates, said regional biodiesel makers.

 

This is in sharp contrast to last year when palm oil prices in the region of $400/tonne and crude oil prices near $75/bbl had made biodiesel sector a lucrative one and attracted much investment.

 

($1=M$3.39)

By: Anu Agarwal
+65 6780 4359

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