Southeast Asia biodiesel may firm but US duties cloud outlook

24 August 2017 06:10 Source:ICIS News

Oil palm 24 August

SINGAPORE (ICIS)--Prices of palm methyl ester (PME) biodiesel in southeast (SE) Asia are expected to be supported in the near term by firm feedstock palm oil values, but the market outlook is clouded by the US’ decision to impose antidumping duties on imports from Indonesia, market sources said on Thursday.

The workable range for PME biodiesel exports from SE Asia was heard this week at $710-760/tonne FOB (free on board) SE (southeast) Asia, up by $20-30/tonne in the previous week, when bids were at below $700/tonne FOB SE Asia.

“Now, $730[/tonne, we] can’t do at all,” a market source, citing price movement in the palm oil market.

Palm oil prices in Asia maintained their uptrend this week on expectations of tight supply.

On Bursa Malaysia, settlement prices for September-November palm oil futures were firmer at between Malaysian ringgit (M$) 2,723-2,738/tonne ($636-640/tonne) on 23 August, while spot prices were also higher from the previous week.

Malaysia and Indonesia are biggest palm oil producers in the world.

In the first 20 days of August, Malaysia’s production estimates were lower than expected, according to market participants.

In July, the country’s crude palm oil (CPO) production increased by around 20.7% month on month, while crude palm kernel oil (CPKO) production grew by around 22.2%, based on data from the Malaysian Palm Oil Board.

Rising CPO futures prices were tracking recent gains in other edible oils such as soy oil markets on the Chicago Board of Trade and China's Dalian Commodity Exchange.

The US’ preliminary decision on 23 August to impose countervailing duties on biodiesel from Argentina and Indonesia, however, could dampen southeast Asia’s export prices of the material.

Over the last few weeks, southeast Asia’s industry players have been fixated on the EU and its ongoing review of antidumping duties on biodiesel imports from Argentina and Indonesia, as well as the broader efforts to curb the use of palm oil-derived edible oils.

Earlier this week, German industry officials said the European Commission’s plans to revise rules for biodiesel produced from rapeseed and other vegetable oils is leading to supply uncertainties for pharma-glycerine, including shortages and prices hikes.

Glycerine is a byproduct of biodiesel production.

Southeast Asia’s industry players are hoping for a reduction or a lifting of the ADDs on Indonesia which have been in place since 2013.

But Europe has been strongly opposed to any such moves, fearing a flood of cheaper biodiesel imports into the EU.

Meanwhile, prices of regular gasoil are still well below biodiesel prices and that has essentially curbed export demand for PME from SE Asia.

The immediate outlook for PME biodiesel remained unclear as the EU continued to delay its decision on the ADDs on Argentine and Indonesian biodiesel.

The EU was due to announce its decision on amending the duties in early August, but the final decision was postponed to 7 September.

In a joint statement to the World Trade Organization (WTO) last week, Argentina and the EU agreed that the EU will now have until 28 September to implement any changes. 

“[There are] still plenty of uncertainties on that,” said another market source.

The US decision to impose punitive duties adds further uncertainty for the biodiesel market in Asia, although Malaysian producers import most of their material to the EU, instead of the US.

Under the latest US ruling, duties of up to 68.28% will be imposed on palm oil biodiesel imports from Indonesia.

In the EU, the tariffs range from 8.8%-20.5% for Indonesian producers and 22%-25.7% for Argentinian producers.

The US commerce department started investigations in April after complaints from the National Biodiesel Board (NBB) and other US industry players.

On a more positive note, efforts by SE Asian nations to increase their own domestic biodiesel blending requirements are expected to continue to support the industry.

Malaysia plans to implement a B10 biodiesel blending mandate but the timing of the rollout remains unclear. A B10 blending mandate requires regular diesel to be mixed with a 10% component of biodiesel.

The country had planned to introduce a B10 mandate in late 2016 but the move was delayed due to high palm oil prices. It is aiming for a longer-term blending goal of either B15 or even B20, matching Indonesia’s blending mandate.

Focus article by Izham Ahmad

Gasoil biodiesel 24 August

($1 = M$4.28)

Additional reporting by Jackie Wong

Pictured above: Oil palm (Elaeis guineensis). Simeulue, Indonesia 2014 (Photographer: Florian Kopp/imageBROKER/REX/Shutterstock)

By Izham Ahmad