FocusAsia PME tracks price falls in feedstock crude palm oil

By Serena Seng

SINGAPORE (ICIS)--Palm methyl ester (PME) spot prices in Asia fell this week, dragged down by declining values of feedstock crude palm oil (CPO), with the market weakness likely to persist in the weeks ahead, industry sources said on Friday.

PME was trading at $1,170-1,190/tonne (€807-812/tonne) FOB (free on board) SE (southeast) Asia on Friday, down $40/tonne from the previous week, while CPO for July delivery was at Malaysian ringgit (M$) 3,107/tonne ($1,029/tonne), slipping M$24/tonne over the same period.

CPO prices started to fall early last week after official data showed a 13.7% month-on-month spike in May production to 210,243 tonnes.

“The increase in CPO production in May has exerted downward pressure on CPO prices,” a Singapore based palm oil trader said.

Over the past two weeks, CPO values have shed M$177/tonne, exerting downward pressure on PME prices.

“Ample [CPO] supply will not support current higher prices,” a Malaysian palm oil producer said.

Meanwhile, PME transactions between Asia and Europe are currently being hampered by a regulation implemented by the International Sustainability Carbon Certification (ISCC) this year, requiring all biodiesel products of various origins meet its environment-friendly or “green” standards.

“The limited supply of ISCC(-approved) PME is hampering trade between Asia and Europe,” a Singapore biodiesel trader added.

Germany is the first country to adopt ISCC’s standards in all biodiesel imports but market players expect other EU countries to follow suit soon.

This poses a big problem to Asian PME producers since Europe is their major export market.

“Not all producers in southeast Asia are keen to be ISCC certified as it involves a lot of money and paper work,” said a Singapore-based trader.

PME is used in biodiesel production.