07 June 2013 09:58 [Source: ICB]
Prices are likely to be stable despite the EU's antidumping investigation on imports from Indonesia
Asia 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.
Malaysian biodiesel producers are hindered by high palm oil costs
Prices have fallen by 10% from the high recorded in late January as fuel blending economics have deteriorated, ICIS data shows.
EU ANTIDUMPING CASE
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 (ADD) investigations started since late August last year. It also has the ability to directly convert PME raw material - crude palm oil (CPO) - into biodiesel.
The EU 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 the 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. The ADDs would be based on estimated dumping margins - the difference between the "fair" price and the import price.
Respondent producers were given until 1 July to raise objections to the EU's initial findings on biodiesel dumping from Indonesia and Argentina, according to one of the affected parties.
Some Indonesian integrated biodiesel producers may have been exporting palm oil instead of PME to Europe since the beginning of 2013, a market source said.
INDONESIA LOOKS TO THE US
Since the EU's probe on biodiesel dumping is expected to continue through to September 2013, Indonesian PME producers are looking to the US as their market.
But the US cannot 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.
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.
NO FRESH MALAYSIA SALES
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.
Gasoil prices were at $857/tonne DDP (delivered duty paid) on 31 May, while crude palm oil prices were at Malaysian ringgit (M$) 2,369/tonne ($771/tonne) - a spread of $86/tonne.
PME is currently priced higher than CPO by around $130/tonne, which is the minimum spread needed to cover production costs, a Malaysian biodiesel maker said.
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