02 February 2010 09:26 [Source: ICIS news]
By Serena Seng
SINGAPORE (ICIS news)--The Asian biodiesel had a sluggish start in 2010 despite a recent spike in crude palm oil prices (CPO) with market players having little hopes of demand recovery in the first quarter, traders said on Tuesday.
The slow start had further dampened regional producers’ hopes of a slight recovery in demand, which had been weak since the last quarter, they added.
CPO prices reached a peak of Malaysian Ringgits (MYR) 2,650/tonne ($784/tonne), while palm methyl ester (PME) values rose above $900/tonne (€648/tonne) FOB (free on board) SE (southeast) Asia on 7 January, they said. PME is produced by crude palm oil and is blended with diesel to form different grades of biodiesel.
Traditional weak demand in Europe during the winter season and a total halt in exports to the US since 1 January had affected the Asian biodiesel market, traders said.
The weak demand had led to a drop in output from major producers across Asia, fuelling concerns about the future of the Asian biodiesel industry as well as fears of a rise in glycerine prices, a by-product of biodiesel production, they added.
Palm oil-based biodiesel rose $210-340/tonne year on year to $840-860/tonne FOB SE Asia on 28 January, according to global chemical market intelligence service ICIS pricing.
Prices were likely to remain in the $800s/tonne level until after March when trade with Europe was expected to pick up, producers said.
Biodiesel from palm oil-based products such as PME are unsuitable for vehicles in Europe during winter due to their higher cold filter plugging point (cpff).
Exports to the US had come to a standstill since the beginning of 2010 due to the expiration of the US biodiesel blending credits, market sources said.
Until the US congress renewed the blending credits, the trade window to the US would remain firmly shut, they added.
None of these plants were producing at full capacity, sources close to these companies said.
Despite the gloomy outlook, Indonesia – the top palm oil producer in Asia – was expected to produce 23m tonnes of CPO in 2010, while Malaysia – the No 2 palm oil producer – would produce 18.1m tonnes this year, market sources said.
The industry would also see some new players in 2010 like Senari Biofuels, which was expected to begin production at its new 120,000 tonne/year plant in Malaysia in March this year, traders said.
($1 = €0.72 / $1 = MYR3.38)
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