US biodiesel orders sputter in key Europe market

28 August 2008 18:46  [Source: ICIS news]

By Ben Lefebvre

HOUSTON (ICIS news)--US biodiesel sellers are seeing orders starting to sputter in Europe, their most important overseas market, sources said on Thursday.

“European orders are slowing a little bit. I think they’re hoping prices drop further, and then they’ll come back in," a US trader said.

"I’m not worried about it. There are still mandates they have to meet, and they’re behind the curve right now,” the trader said. 

Pure soy-based biodiesel from the US is currently selling at about $4-4.20/gal (€0.72-0.75/litre) FOB (free on board) USG (US Gulf), down about 50 cents/gal from just a week ago, according to global chemical market intelligence service ICIS pricing.   

US biodiesel producers ship about 75% of their product to Europe, which has a better developed renewable fuels infrastructure.

In fact, US biodiesel refiners have boosted production. The latest US Department of Energy data shows they made 248m gal (939m litres) of the renewable fuel during the first five months of 2008, compared with 158m gallons during the same period last year.

At the same time, sellers have lowered prices to clear their tanks of material.

A fall in feedstock soybean oil prices and competition from Argentine biodiesel producers have also led US suppliers to cut prices, sources said. 

Any waiting game customers are playing could backfire, however, if there is a spike in crude oil or soybean prices, leaving buyers at the mercy of empowered sellers, sources said.

Some also said the stronger dollar is to blame for slowing sales. 

“There’s drop off in orders. That’s due to exchange rates," a European distributor said.

"Business could pick up again as they have to fill mandates,” the distributor said.

With the euro currently trading at $1.47, a six-month low and down from highs of $1.59 reached earlier in the year, European purchasing power has weakened.

With the European economy contracting in the second quarter for the first time in nearly a decade, some US biodiesel sellers see a few more bumps in the road, mandates or no mandates.

“The European market is slowing. Poor economics over there are hurting sales,” a US biodiesel producer said. 

($1 = €0.68)

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By: Ben Lefebvre
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