31 May 2013 08:05 [Source: ICIS news]
By Heng Hui
SINGAPORE (ICIS)--Asia’s spot prices for palm methyl ester (PME), a type of palm oil-derived biodiesel, may remain at around $900/tonne (€693/tonne) in the near term as waning demand is being countered by low supply available in the market, market participants said on Friday.
On 30 May, PME prices were assessed at $880-930/tonne FOB (free on board) SE (southeast) Asia, down by $10/tonne at the high end from the previous week.
Prices have come off by 10% from the high recorded in late January as fuel blending economics have deteriorated, according to ICIS data.
Indonesia and Malaysia are the main exporters of PME in southeast Asia.
Debt-saddled Europe, which is a major market for Indonesia, has been curbing its PME exports due to the antidumping duty investigations started since late August last year and has the ability to directly convert PME raw material – crude palm oil (CPO) – into biodiesel.
The region decided to implement punitive provisional duties on biodiesel imports from Indonesia and Argentina starting 27 May, after establishing a case of dumping that is hurting EU’s domestic industry.
In 2012, Europe imported about a third of Indonesia’s 3m tonnes of PME output, with no recorded shipments from southeast Asia to the US because of poor blending economics, industry sources said.
But Indonesian producers have mostly halted PME exports to Europe since the antidumping probe began, making them largely immune to the actual imposition of the EU ADDs on biodiesel imports, industry sources said.
Respondent producers were given until 1 July to raise objections to EU’s initial findings on biodiesel dumping from Indonesia and Argentina, according to one of the affected parties. (Please see Table 1 below)
Some Indonesian integrated biodiesel producers may have been exporting palm oil instead of PME to Europe instead since the beginning of 2013, market source said.
Since EU’s probe on biodiesel dumping is expected to continue through to September 2013, Indonesian PME producers look to the US as their market.
But the US could not fully make up for the loss of demand from Europe, since PME is regarded in the US as less valuable compared with other biodiesel grades such as soybean methyl ester (SME).At present, the overall supply-demand situation in the PME market is balanced with fuel consumption generally low in major European economies amid the fiscal troubles in the region.
Malaysia has been beefing up PME production as it started selling some volumes to Europe, to fill the void left behind by Indonesia to a certain extent, but is being constrained by high cost of feedstock CPO, industry sources said.
In the first four months of the year, Malaysia’s PME exports, which mostly went to Europe, totalled 39,708 tonnes. Before the EU ADD probe started on Indonesian PME imports, Malaysia was unable to gain market share in the region, which was dominated by its rival southeast Asian country, industry sources said. (Please see Table 2)
All of Malaysia’s PME exports to Europe had been booked during the fourth quarter of last year, when profits to be had were high, said a southeast Asian producer. Now, they are just fulfilling the purchase orders and are not generating fresh sales, he said.
A few Malaysian producers, meanwhile, said that it is uneconomical to export PME to Europe because of a narrow spread between the benchmark gasoil prices - which serves as a price ceiling for PME - and feedstock crude palm oil (CPO) values.
Gas oil prices were at $856.75/tonne DDP (delivered duty paid) at 14:00 Singapore time (7:00 GMT) on 31 May, while crude palm oil prices were at Malaysian ringgit (M$) 2,369/tonne ($771/tonne).
PME is currently priced higher than CPO by around $130/tonne, which is the minimum spread needed to cover cost of production, a Malaysian biodiesel maker said.
Table 1. Provisional dumping margins?xml:namespace> Company Provisional dumping margin PT. Ciliandra Perkasa 0,0% PT. Musim Mas 2,8% PT. Pelita Agung Agrindustri 5,3% PT. Wilmar Bioenergi Indonesia 9,6% PT. Wilmar Nabati Indonesia 9,6% Other cooperating companies 6,5% All other companies 9,6% Source: Official Journal of the European Union Table 2: Malaysia's PME exports Jan February March April Total BIODIESEL Tonnes 9,407 7,173 14,583 8,545 39,708 RM Mil 26.33 19.69 42.86 24.23 113.12 M$ per tonne 2,798.98 2,745.02 2,939.04 2,835.58 ($1 = M$3.07 / $1 = €0.77)
Table 1. Provisional dumping margins?xml:namespace>
Provisional dumping margin
PT. Ciliandra Perkasa
PT. Musim Mas
PT. Pelita Agung Agrindustri
PT. Wilmar Bioenergi Indonesia
PT. Wilmar Nabati Indonesia
Other cooperating companies
All other companies
Source: Official Journal of the European Union
Table 2: Malaysia's PME exports
M$ per tonne
($1 = M$3.07 / $1 = €0.77)Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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