SE Asian biodiesel to face subdued export market ahead

Author: Izham Ahmad


SINGAPORE (ICIS)--Spot prices of palm methyl ester (PME) biodiesel in southeast (SE) Asia were stable in the week ended 11 July with market participants expecting a subdued export environment in coming months.

(Source: Photo by Environmental Images/Universal Images Group/REX/Shutterstock)

In the week, PME prices were at $580-630/tonne FOB (free on board) SE (southeast) Asia, unchanged for the second straight week.

There was limited buying from buyers in China this week while selling indications from southeast Asian suppliers were also largely absent from the market.

Latest buying indications were well below the ICIS range while southeast Asian producers said they would not offer any export cargoes below $610/tonne FOB SE Asia to protect their profit margins.

This was also after factoring in the price of feedstock crude palm oil and the price of gasoil, or regular diesel fuel.

The expected lull in export demand may not necessarily be a serious concern for some producers who have an alternate outlet via their respective domestic markets, where local biofuel blending mandates have provided significant support for the industry.

Many producers in the region have said that they were directing most of their available output and inventories toward meeting their local blending mandates and as such, had limited available stocks left for the export market.

“We do not have cargo to offer yet,” said one producer. “The export opportunity is closed so far.”

A biodiesel blending mandate means diesel blend sold at pump stations should contain at least some percentage of biodiesel, mixed with regular diesel.

In southeast Asia, the main feedstock for biodiesel is crude palm oil (CPO).

In the feedstock crude palm oil (CPO) futures market, futures values traded on the Bursa Malaysia exchange were mostly softer compared with the previous week. The August contract settled at M$1,913/tonne as of 10 July compared with M$1,934 a week before.

Indonesia, Malaysia and Thailand are the world’s three biggest palm oil producers. Together, Indonesia and Malaysia account for over 90% of global palm oil production while Thailand’s output is significantly lower.

On 1 July, Malaysia implemented its latest blending ruling, which is a B7 blend for the industrial sector. It moved to B20 for the commercial sector in February.

Since 2016, Indonesia has increased its biodiesel mandates from five per cent biodiesel (B5) to B7 and in September 2018 doubled that to B20, in a move that caught some by surprise. It now plans to increase that to B30 in January 2020.

ICIS Editorial Chart goes here

Focus article by Izham Ahmad