09 May 2008 07:02 [Source: ICIS news]
By Jeremiah Chan
SINGAPORE (ICIS news)--As skyrocketing palm oil levels in Asia make biodiesel production increasingly uneconomical, palm methyl ester (PME) manufacturers are now turning their focus to glycerine refining, producers and traders said on Friday.
Benchmark crude palm oil (CPO) futures for July delivery were trading at ringgits (M$)3,465/tonne ($1,076/tonne) on Bursa Malaysia on Friday, around 40% higher than levels seen just one year ago.
"[Raw material] RBD (refined, bleached and deodorised) palm olein is at $1,300/tonne FOB [free on board] Malaysia, while buying ideas for PME are still $1,200/tonne FOB," the trading manager of a biodiesel producer based in Malaysia said, adding that the economics of PME production did not make sense today.
With so much doubt cast upon the viability of PME manufacturing after heavy investments in production facilities, PME producers in the region, noting recent hikes in glycerine prices, are buying up and refining competitively priced crude glycerine from south America and Europe, before reselling them to end-users in the region.
Richard Selwood, chairman of Australian Natural Fuels which has a 600,000 tonne/year PME production facility and a 60,000 tonne/year glycerine refinery in Singapore, had earlier said that they would indefinitely postpone biodiesel production and focus on glycerine refining.
In a similar vein, a source from biodiesel producer Peter Kremer said that they were planning to start a 30,000 tonne/year glycerine refinery at its joint venture plant with Kulim in Kuantan, Malaysia, by the end of the year.
Mission Biofuels also announced in a statement on Tuesday that it would ramp up its glycerine refining volume to 900 tonnes/month, from the current 600 tonnes/month.
"There’s still margin for glycerine refining," an official from a major oleochemical trading firm said, adding that with crude 80% purity glycerine currently available from south America at $700-800/tonne CFR (cost and freight) southeast (SE) Asia, margins for glycerine refining remained comfortable.
Refined glycerine sold in drums was assessed at $1,600-1,720/tonne FOB (free on board) SE Asia during the week to Wednesday, according to global chemical market intelligence service ICIS pricing.
Other producers and traders in the region were still wary of the long-term viability of such a business, as concerns over the availability of crude glycerine as well as volatility in refined glycerine pricing remained.
"There’s a two month turnaround period from the time we book the crude glycerine, refine and sell it," a senior official from a Malaysian biodiesel plant said, adding that due to the volatility in refined glycerine prices, "millions of dollars could potentially be lost."
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