07 September 2012 15:39 [Source: ICB]
Argentina tax increase likely to limit availability of material to export, pushing up China spot prices
Spot prices of crude glycerine shipments to China are likely to be supported by tight supply and an expected seasonal improvement in Chinese demand during the fourth quarter, market players said.
Argentina biodiesel producers are likely to have less by-product crude glycerine to export after the country's government raised taxes on biodiesel exports to 32% from 20% earlier in August, traders in Asia said.
"Some biodiesel plants have stopped operations. More are likely to follow suit," a trader said.
The export-oriented biodiesel industry in Argentina is facing an uncertain future as the government of Spain - Argentina's largest biodiesel market - announced in April a quota system to import only EU-produced biodiesel after Argentina seized control of Spanish-owned oil company YPF.
"Some Argentinean plants were already running at reduced rates because of the trade dispute. The export tax increase will make things even more difficult for the industry," a trader said.
Argentina exported to China more than 70,000 tonnes of crude glycerine in 2011 and around 31,600 tonnes between January and June this year.
With the supply of Argentinian crude glycerine expected to fall, sellers in Brazil - a key exporter to China - are taking a wait-and-see stance, traders and brokers said.
"They have no inventory pressure and they are waiting for prices to go up further," a broker said.
Spot prices of crude glycerine in flexi-bags have already risen by $12.50/tonne (€10/tonne) since mid-August to $325.50/tonne CIF (cost, insurance and freight) China Main Port.
The availability of crude glycerine from biodiesel plants in Indonesia will likely tighten as the peak summer demand season in the key market of Europe has ended, an end-user said.
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