Europe RME biodiesel demand capped by high inventory

09 January 2014 19:24 Source:ICIS News

LONDON (ICIS)--Seasonal demand for rapeseed methyl ester (RME) biodiesel grade is lower-than-expected due to healthy customer inventory generated by pre-buying in the fourth quarter of 2013, sources said on Thursday.

Coupled with plenty of offers in the market, the slow demand has exerted downward pressure on RME premiums over ICE Gasoil futures.

RME has an advantageous cold filter plugging point (cfpp) that ensures it is in high demand during winter, but this has not been the case so far this year.

Overall, European biodiesel premiums are on the decline due to healthy supply and poor demand, and dropping feedstock prices.

"It has been a slow start to the year", an industry source said.

However, the number of biodiesel trades have increased from last week, albeit by a small margin, after a number of participants returned from the winter holidays.

Market activity in the paper market accelerated over Tuesday and Wednesday, before falling on Thursday.

The increased activity in the paper market mid-week indicated buyers were emerging from the sidelines to get a feel for the market, a second industry source said.

However, the majority of buyers are still likely to wait until they feel premiums have hit rock bottom before they close deals, the second source added.

Meanwhile, supply is healthy because of a good harvest in upstream virgin vegetable oils, a source said.

The market outlook remains unclear at present because of uncertainty regarding feedstock pricing and demand levels, but sources expect a clearer picture to emerge in the coming weeks.

By Cuckoo James