Biodiesel Report. MARCH 20 th 2017

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1 MARCH 20 th 2017 Market Highlights Biodiesel Feedstock Markets and Price Forecasts Biodiesel Markets and Prices Biodiesel Profitability Violation of copyright is an offense. Any distribution of this report without Oleoline s express agreement is a copyright violation. You are welcome to give us your feedback: oleo@oleoline.com A member of the group We publish since 1986 accurate and relevant analysis and prices of the glycerine, oleochemical, vegetable oil and related markets. Oleoline Ltd. - 6th Floor, St. John s Building, 33 Garden Road, Central Hong Kong HONG KONG

2 1 Market Highlights After the country s last major El Nino phenomenon in , Malaysian palm oil production saw substantial growth the following year. It was 20 years later when this industry has known almost identical phenomenon in the country s production growth following the more recent and important El Nino seen in The Malaysian Biodiesel Association anticipates a growth of production of about 5 million mt above the 2016 level of 17,32 million tons of crude palm oil. A further 1 million mt are expected from Indonesian origin. Palm stocks are expected to begin to recover from July 2017 but at the same time, it will face strong competition from South American soya oil, as the previsions of soybean harvest are high for this year, leading to a decrease on CPO prices on the second half of the year. During the Palm Oil Conference held in Kuala Lumpur last week, biodiesel consumption in Indonesia and Malaysia was heralded once again as the wild card which would offset any future increase in production and guarantee that prices would not fall below historical levels. The reality is that the mandates have up until now only been a tool of communication and never really absorbed substantial volumes of palm oil. 2 Below is the Malaysian biodiesel identity card. Production of biodiesel in Malaysia is still far below full capacity. Introduction of the B10 mandate accounted for the utilization rate at 33% which is way below industry full capacity. Biodiesel identity card Country : Malaysia Mandate 2016 : B7. (B10 in 2017) Double counting : no In 000 mt est Biodiesel consumption Biodiesel production Biodiesel imports Biodiesel export Diesel consumption % biodiesel blend in diesel

3 2 Biodiesel Feedstock Markets and Price Forecasts Palm Oil Palmoil has stayed bracketed between MYR 2725 and 2825 pmt on most of the days in past fortnight with continued bearish bias. The third month futures fell back to MYR 2750 pmt about after expiry of March contract. Products were also quoted a shade lower by about USD 5 pmt in FOB terms with RBD Olein moving up to command small premium over CPO. Malaysia has declared export duty for CPO for month of April at 7.50% which is lower than prevailing duty of 8%. USA Fed has increased interest rates by 0.25% a third raise in recent months which should strengthen the dollar. Asian currencies, however has strengthened in recent weeks. The Indian Rupee specifically, has gained significant climb on strength of ruling party winning assembly elections in the majority of states that went to poll. This will help improve import parities. The first half of March imports were marginally higher for one surveyor in Malaysia. Malaysian Palm Oil Board report for February results showed marginally lower production as compared to January. The stocks were down by over 5,3% as exports declined during the month by nearly 14%. With some pick-up in demand as expected it will be difficult for the market to penetrate MYR 2700 pmt level on the downside. The upside potential may start seeing strong resistance beyond MYR 2850 pmt particularly if production shows some upsurge expected in Indonesian palm belts. We expect price to remain range bound in short term with CPO futures in MYR pmt range with slight pull up due to better demand for the upcoming Ramadan. The front month FOB level for CPO should range in USD 720 pmt with steep discounts for forward months and Olein to stay on par or at marginal premium over CPO level. 3 Soybean Oil It was Soybean Oil s turn to take some beating in past fortnight. It dropped about 2 cents per lb. in CBOT futures and in cash market South American FOB level declined by nearly $60 per MT with weak basis adding to the agony! Benevolent weather in Brazil-Argentina and slump in Palm Oil values despite some noises in the Price Outlook Conference re bullish possibilities impacted the sentiment negatively in Soya complex. Soybeans sank below $10.00 per bushel and still looking weak. Brazil output projection has been scaled up to 108 million MT and Argentina estimate upgraded to 56 million MT. With shrinkage in the price spread over main competitor Palmoil, Soybeanoil remains attractive buy. The steep discounts in forward months positions in Palmoil will continue to pressure soybean oil and post-harvest months discounts may have to widen. The petro complex has weakened substantially in past two weeks under review and NYMEX has dropped by over $5 per barrel which will not help boost margins for Biodiesel manufacture. We think market should stabilize at current levels and stay in the range of USc per lb. with FOB levels in South American ports ruling at USD 700 pmt with higher price level for the front months. Rapeseed Oil The first Australian rapeseed shipments arrived in Europe, supplementing the scarce domestic supply. From July 2016 to February 2017, the EU imported around 1.05 million mt of rapeseed from Australia. Another 2-3 million mt are likely to follow in spring. However for the season 2017/2018 European rapeseed crop is expected to be good.

4 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Rapeseed oil Prices of vegetable oils declined considerably at 786 pmt FOB Mill Netherlands. Prospects of a large production of palm oil in 2017 generated some pressure, as did the predicted record soy crop in Brazil that has become real. Other Feedstocks France, with the largest poultry flock in the EU, has been severely hit by the H5N8 bird flu virus that has been spreading in Europe since late last year. The last week, the CIFOG (The association of foie gras producers) communicated that it led to the death or culling of 3.7 million ducks in the South Western part of the country. The market estimates a decrease of about 50% of poultry grease volume produced until August This affects directly the pet food and feed industries, which are now sourcing beef/pork tallow as a replacement. As a result, tallow category 3 prices saw a slight increase of 10 EUR for at EUR 790 pmt while category 1 tallow was traded at EUR 620 pmt, both prices delivered customer in bulk. UCO prices continue to decrease. Last week, UCO was traded at around EUR 770 pmt FOB ARA, Eur 15 pmt less than the previous report. 4 Vegetable Oils Spot Prices Crude Rapeseed Oil FOB R'dam -USD/pmt Crude Soyabean oil FOB US Mill - USD/pmt RBD Palm Olein FOB Malaysia - USD/pmt Current M+5 VEGETABLE OILS / UCO traded futures RSO FOB Mill Netherlands pmt 786 EUR 749 EUR SBO FOB US Mill pmt 711 USD 721 USD SBO FOB Argentina pmt* 700 USD 719 USD RBD Olein FOB SE Asia pmt 725 USD 625 USD CPO FOB Indonesia pmt** UCO max 10 FFA FOB ARA *includes 27% export tax. **includes USD 50 pmt export tax. 720 USD 770 EUR FUEL PRICES excl VAT Spot Current FAME 0 FOB ARA / mt 880 USD -35 FAME -10 FOB ARA / mt T2 905 USD -35 RME EXW Germany ct/100 litres 77 EUR -2 PME FOB Indonesia / mt 770 USD -110 SME FOB Argentina / mt 740 USD - ISCCEU UCOME FOB ARA / mt 965 EUR -65 ULSD 10 ppm FOB NWE / mt (Ultra Low Sulfur Diesel) Diesel Fuel selling price at pump in Germany Inclusive VAT 483 USD Change from last report 114 EUR -4 per 100 litres Brent Crude Oil per barrel 52 USD -3 +3

5 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 3 Biodiesel Markets and Prices Europe The lack of demand subsequent to lower diesel prices combined with strong availability of biodiesel European market. In parallel with volatility on gasoil markets this week, the price of RME were impacted, with a few businesses reported at around USD 915 pmt FOB ARA, the lowest level so far this year. The UCOME demand remains below expectations, having an important impact on prices, volumes were traded at EUR 965 pmt FOB ARA, 65 EUR less than last report. South America Exports of SME from Argentina continue to be low with only mt to be shipped to the USA. Argentine producers remain dependent of possibilities to export biodiesel, starting with the US market. On the other hand, SME producers expect the cancelation of the European anti-dumping to take in place before the end of the year. The bulk of production is currently serving the domestic market. Despite the implementation of the B8 mandate in Brazil, no business was observed the last days. Brazilian biodiesel producer are waiting for the next tender in April to benefit from this new mandate. PORT VESSEL DATE TONS SHIPPER DEST. ARAUCO ARGENTINA CALETA ROSARIO 19-Mar YPF ARGENTINA ARAUCO ARGENTINA PUNTA MOGOTES 26-Mar YPF ARGENTINA AKZO NOBEL MAHADAH SILVER 28-Mar BIOSPHERE USA DREYFUS VEGOIL TERMINAL BW FALCON 18-Mar LDC USA 5 South-East Asia During the Palm Oil Conference, a growth of over 6 million mt worldwide on CPO was estimated for 2017, thanks to a recovery on production expected during the second half of the year. With biodiesel producers in the region continuing to operate at lower plant utilisation rates, supply is expected to remain short in the near future before shipments for the summer season actually start. This week PME was traded at about USD 770 pmt FOB in bulk, a significant decrease of USD 110 pmt from last report. USD per barrel EUR per 100 litres Fuel Spot Prices USD/pmt FAME EN14214 FOB NWE - EUR/100 litres Brent Crude Oil - USD per barrel ULSD 10 ppm FOB Rotterdam - USD/pmt

6 4 Model Cost Calculation for Biodiesel Production SODIUM METHYLATE 600 EUR 30:70 solution (contract) delivered METHANOL (contract) Q1'17 FOB ARA 370 EUR USA delivered 499 USD SE Asia delivered 500 USD GLYCERINE Current traded 80% kosher non-gmo crude DDP Europe 310 EUR 80% crude FOB US factory 220 USD 80% crude FOB SEA* 280 USD 80% crude FOB Argentina 250 USD *no import duty from ASEAN to China 6% if coming from elsewhere 6 Feedstock oil price ex mill/fob ARA for UCO Semi-refining/degumming cost Loss (3%) + credit for acid oil Cost of semi-refined feedstock ex refinery Freight to biodiesel plant Cost of semi-refined feedstock DDP Catalyst usage delivered Methanol usage (11%) delivered Crude glycerine credit 10% at 100% concentration exw Indonesian Tax Levy USD 50 pmt (+USD 18 if CPO>800) Argentinian Export Tax 23,04%** Material cost of biodiesel ex works Variable production costs Out of pocket cost of biodiesel ex works FOB costs (for PME/SME/UCOME) + transport Biodiesel price ex works pmt for RME Biodiesel price FOB for PME/SME/UCOME Fixed cost contribution/margin of biodiesel production European RME European UCOME Indonesian PME* Argentine SME EUR/mt EUR/mt USD/mt USD/mt ,9 8,8 7,7 824,9 808,8 740,0 727, ,9 823,8 747,0 727,7 15,0 15,0 14,2 14,2 43,5 43,5 55,0 60,4-33,8-16,3-30,0-21,3-50,0-167,7 859,6 866,0 736,2 613, ,6 896,0 766,2 648,4 872,0 Exchange Rate: 1 EUR = 1.06 USD ,0 770,0 740,0-17,6 54,0-8,2 86,6 Profitability Trend * based on CPO **March 2017 Indonesian export tax differential between CPO and PME = USD 50 and 18 pmt if CPO > USD 800 pmt (7% for Malaysia) Argentinian export tax differential between SBO (27%) and SME (3.96%) = 23.04% EU anti-dumping duties for Argentina are on average 24.6% ( 216 to 245 pmt) and for Indonesia about 18.9% ( 77 to 179) Note: These are indicative models for biodiesel production in Europe, Argentina and Indonesia at replacement cost for vegetable oils/used cooking oils and are based on certain assumptions (for example, freight costs and variable costs) which may differ from factory to factory.

7 Order our other market reports Quarterly Glycerine Market Report: Weekly Refined Glycerine Report: Two Weekly Crude Glycerine Report: Two Weekly : Two Weekly Oleochemical Report: Fatty Alcohol Capacities: Fatty Acid Capacities in China: Vegetable Tropical Oil Report: Report on MES: EUR 1500 per annum EUR 3000 per annum EUR 800 per annum EUR 1000 per annum EUR 3000 per annum We specialize in tailor-made reports offering the specific information that you have not been able to find. Ask us for a quotation: oleo@oleoline.com These quotations are averages of price ranges pertaining in the market during the two weeks reported. They are based on bids, offers and trades heard in the market or handled by our sister company HBI during the period concerned, and we believe them to be representative of market levels. However, Oleoline cannot accept any responsibility for these figures nor liability for commercial decisions based on the content of this report. Violation of copyright is an offence. Any distribution of this report without Oleoline 's express agreement is a copyright violation. A member of the group We publish since 1986 accurate and relevant analysis and prices of the glycerine, oleochemical, vegetable oil and related markets. Oleoline Ltd. - 6th Floor, St. John s Building, 33 Garden Road, Central Hong Kong HONG KONG