1/ Market Highlights The trade war among countries like USA, China, Turkey and Iran has put the main vegetable oil complex under pressure, except for rapeseed oil. Soy futures have been in decline last years due to large harvests in the main producing countries like Brazil and the US. They fell further after China announced tariffs of 25% on American soy. In fact, soy is the number one item China buys from the USA. The same situation was observed for the palm complex. During the last months, palm oil has been under pressure and the situation got worse as exports are now impacted by emerging-market sliding currencies in the wake of the Turkish Lira crisis. As a result, the reduced purchasing power reduced palm oil imports into countries like Turkey and India. The Iranian palm oil demand will decline 10 %, also weakened by the new US sanctions which took effect at the beginning of this month. With palm oil prices under pressure and with crude oil over the level of USD 70 per barrel (mineral diesel at USD 649 pmt), we are likely to see more PME sold as discretionary blending. On the other side, rapeseed oil benefitted from a good demand in the European biodiesel industry. As can be seen on the table below, this year the industry hopes to produce about 15 860 mt of biodiesel (including 2 500mt of HVO). EU-28 In 000 mt 2015 2016 2017 est. 2018 est. Biodiesel consumption 12 900 12 707 13 682 13 957 Biodiesel production 12 659 12 551 13 182 12 082 Biodiesel imports 475 510 1 190 1 936 Biodiesel exports 216 359 356 352 Diesel consumption 165 218 170 343 174 300 178 450 % biodiesel blend in diesel 7.3 7 7.4 7.3 *Including HVO 1
2/ Biodiesel Feedstock Markets and Price Forecasts Palm Oil The market for CPO futures tried to move up and crossed MYR 2250 pmt from MYR 2200 pmt but has retraced back to wash out most of the gains made by closing on 16th August at MYR 2205 pmt The trade is not enthused about seeing any direction and seems to prefer to lie low. Indian Rupee has weakened substantially pushing up the landed costs and preventing any serious replacement buying. July Imports by India of palm oil continued to be dismal. With no support from soft oils including soybean oil which also declined, palm oil is running out of factors boosting an upside move. We expect market to move sideways and chances are it will drift lower in the medium term towards the crucial support level of MYR 2120 pmt. Weaker Ringgit has pushed the FOB levels lower during the past two weeks. We see the market move in MYR 2175-2250 pmt range with a bearish bias. CPO FOB level should range in USD 515-545 pmt range with Olein continuing to command a USD 25-30 pmt premium for front months and about USD 5 pmt less for forward months. Soybean Oil The Soybean complex has dropped lower across the board with downswing in Soybeans, Soybean oil and soymeal. Soybean oil futures lost nearly 50 cents per lb (USD 10 pmt). However, the basis stayed stable for price conversion to FOB Argentina which is now pegged at USD 637 pmt. US Midwest received some precipitation taking out the anxiety of the trade that the drought will persist. With no further dramatic announcement by President Trump the major source of providing some excitement seems to have dried up! The weather in the next couple of weeks will play a crucial role in determining the yields. If there is no unexpected hiccup, the USA is heading for yet another large crop. The US farmers are expecting Government support if prices come under pressure due to non-buying by China when the crop arrivals commence. If the recent lows remain untouched, then we see some possibility of revival which could take prices closer to 29 cents per lb in CBOT. FOB levels should move up in tandem from USD 637 pmt level and move in the range of USD 630-670 pmt range with marginal bullish bias. Rapeseed Oil In contrast to the rest of the vegetable oils situation, rapeseed oil prices continue to recover. This increase is due to a stable demand for biodiesel production in the EU. Moreover, the expectations for a small 2018 EU rapeseed crop has pushed biodiesel producers to already pay premiums prices to fulfil their needs. Last week, rapeseed oil sold at about EUR 750 pmt FOB Mill, up EUR 29 pmt from our last report. 2
Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 BIODIESEL MARKET REPORT Other Feedstocks The tallow market was still quiet during the last weeks of the summer break. Q4 businesses were closed at about EUR 550-570 pmt DDP North West Europe. Cat 1 prices remain stable also at EUR 460 pmt DDP NEW in bulk in tank trucks. UCO prices have recently been affected by the lack of demand on UCOME. Last week, price decreased by 15 EUR pmt from our last publication to be traded at about EUR 560 pmt FOB ARA. Vegetable Oils Spot Prices 900 700 500 Crude Rapeseed Oil FOB R'dam -USD/pmt Crude Soyabean oil FOB US Mill - USD/pmt RBD Palm Olein FOB Malaysia - USD/pmt VEGETABLE OILS / UCO Current Month + 3 traded futures RSO FOB Mill Netherlands pmt 721 EUR 723 EUR SBO FOB US Mill pmt 621 USD 628 USD SBO FOB Argentina pmt* 633 USD 653 USD RBD Olein FOB SE Asia pmt 555 USD 575 USD CPO FOB Indonesia pmt** 535 USD 548 USD UCO max 10 FFA FOB ARA 560 EUR *includes 23% export tax. **includes USD 50 pmt export tax. 3
3/ Biodiesel Markets and Prices EU biodiesel market was quiet during the past week. The weak palm complex has put some pressure on FAME0 prices. Last week some businesses were closed at EUR 885 pmt FOB ARA, EUR 45 pmt down from our last publication. UCOME buyers preferred to wait before closing more businesses. As a result, large volumes of UCOME were available on the market at USD 865 pmt FOB ARA, EUR 15 pmt less than at the beginning of the month. RME prices decreased also EUR 2 cents/100l to EUR 73 cents/100l ex German plant. The 62nd Brazilian tender will end in the coming days. The industry hopes to hit a new record on the volume of biodiesel traded. Argentinian SME exports are still under pressure. Only 41 500 mt are lined up to be exported in the coming days, of which 31 500 mt are confirmed to the EU. SME prices are stable but low at about USD 670 pmt FOB in bulk. PORT VESSEL DATE TONS SHIPPER DEST. SAN LORENZO MAKENITA H August 18th 4 000 YPF ARGENTINA TBC SAN LORENZO PUNTA MEDANOS August 27th 6 000 YPF ARGENTINA TBC SAN LORENZO ATLANTIC MARBLE August 18th 31 500 GUNVOR NETHERLANDS The Malaysian government has decided to lower its export tax on crude palm oil for September to 0%. The objective is to stimulate the exports, which are on very low levels due to the current trade tensions among US and some emerging markets like China and Turkey. Slowing demand will weigh on benchmark palm prices, currently already being traded at around two-year lows. The Indonesian President has signed biodiesel rules. This new Presidential decree allows CPO fund to facilitate all biodiesel products (both PSO (Public Service Obligation) and non PSO). Previously, CPO fund can only be used to facilitate biodiesel for PSO usage. And there is a maximum limit (ceiling) on the subsidy paid by CPO fund to biodiesel producers. Malaysian PME offers are around USD 660-670 pmt FOB, while Indonesian offers are at USD 650 pmt FOB. EU bids are stable but low at USD 600 pmt FOB. 4
Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 BIODIESEL MARKET REPORT USD per barrel EUR per 100 litres 85 80 75 70 65 60 55 50 Fuel Spot Prices USD/pmt 800 700 600 500 400 300 200 100 FAME EN14214 FOB NWE - EUR/100 litres Brent Crude Oil - USD per barrel ULSD 10 ppm FOB Rotterdam - USD/pmt FUEL PRICES Spot Change from excl VAT Current last report FAME 0 FOB ARA / mt 885 USD -45 FAME -10 FOB ARA / mt T2 930 USD -55 RME EXW Germany ct/100 litres 73 EUR -2 PME FOB Indonesia / mt 650 USD - SME FOB Argentina / mt 670 USD - ISCCEU UCOME FOB ARA / mt 865 EUR -15 ULSD 10 ppm FOB NWE / mt (Ultra Low Sulfur Diesel) 648 USD -2 Diesel Fuel selling price at pump in Germany Inclusive VAT per 137 EUR +3 100 litres Brent Crude Oil per barrel 72 USD - Glossary RSO Rapeseed Oil FOB Free on Board SBO Soya Bean Oil RBD Refined, Bleached and Deodorized CPO Crude Palm Oil UCO Used Cooking Oil FFA Free Fatty Acids ARA Amsterdam Rotterdam Antwerp FAME Fatty Acid Methyl Ester RME Rapeseed Methyl Esther EXW Ex-Works PME Palm Methyl Esther SME Soya Methyl Esther ISCCEU European International Sustainability & Carbon Certification UCOME Used Cooking Oil Methyl Ester ULSD Ultra-Low-Sulfur Diesel 5
4/ Model Cost calculation for Biodiesel Production GLYCERINE SODIUM METHYLATE 846 EUR Current 30:70 solution (contract) delivered traded 80% kosher non-gmo crude DDP Europe 270 EUR METHANOL (contract) Q2'18 80% crude FOB US factory 250 USD FOB ARA 419 EUR 80% crude FOB SEA* 340 USD USA delivered 485 USD 80% crude FOB Argentina 290 USD SE Asia delivered 480 USD European RME European UCOME Indonesian PME* Argentine SME EUR/mt EUR/mt USD/mt USD/mt Feedstock oil price ex-mill/fob ARA for UCO 721 560 530 633 Semi-refining/degumming cost 30 30 25 20 Loss (3%) + credit for acid oil 8,3 6,6 7,1 Cost of semi-refined feedstock ex refinery 759,3 596,6 555,0 660,1 Freight to biodiesel plant 10 15 7 Cost of semi-refined feedstock DDP 769,3 611,6 562,0 660,1 Catalyst usage delivered 21,2 21,2 18,6 18,6 Methanol usage (11%) delivered 48,8 48,8 52,8 58,9 Crude glycerine credit 10% at 100% concentration exw -28,8-16,3-37,5-26,3 Indonesian Tax Levy USD 50 pmt (+USD 18 if -50,0 CPO>800) Argentinian Export Tax Differential 11%** -72,6 Material cost of biodiesel ex works 810,5 665,4 545,9 638,6 Variable production costs 30 30 30 35 Out of pocket cost of biodiesel ex works 840,5 695,4 575,9 673,6 FOB costs (for PME/SME/UCOME) + transport 15 12 5 Biodiesel price ex works pmt for RME 826,7 Biodiesel price FOB for PME/SME/UCOME 865,0 650,0 670,0 Fixed cost contribution/margin of biodiesel production -13,8 154,6 62,1-8,6 Profitability Trend Exchange Rate: 1 EUR = 1.14 USD * based on CPO **August 2018 Indonesian export tax differential between CPO and PME = USD 50 and USD 18 pmt if CPO > USD 800 pmt (Malaysia 4.5% for August if CPO is above MYR 2250) Argentinian export tax differential between SBO (26%) and SME (15%) = 11% EU anti-dumping duties for Indonesia and Argentina 0% for 13 producers (Announcement in March 2018) 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. Oleoline is a member of the group We publish since 1986 accurate and relevant analysis and prices of the glycerine, oleochemicals, vegetable oil and related markets. Contact: oleo@oleoline.com