Biodiesel Exports: Palm Oil


Growing demand for biofuels from China and Europe has seen Palm Ester exports from Indonesia and Malaysia rise by more than 30% in the first quarter of this year, the Malaysian Reserve said on April 8. 

The main reason behind the increase was the widening gap between the price of palm oil and Brent crude, which jumped by 27% in the first three months of the year, according to the report.

“China has started buying and flows are considered healthy in the coming months,” although they will still depend on diesel prices, said Heather Zhang, an analyst at consultancy PRIMA. “Arbitration was opened in February as prices fell, making palm more attractive to European buyers compared to other feedstocks such as waste-based biodiesel.”

The increase in exports was a rare bright spot for Malaysia and Indonesia as palm prices have fallen by more than 8% in the past two months amid concerns about stock sizes and weak demand, the Reserve wrote from Malaysia. The drop in prices eliminated the gains made in January, and also occurred when the European Union (EU) started to limit the amount of palm heart-based biofuel that can be used in the bloc.

Malaysian and Indonesian SME shipments to Europe likely rose by more than 30% to 145,000 metric tons in the first quarter of 2019, Zhang said, citing his analysis and discussions with industry executives. Malaysia's export could only reach 100,000 tonnes in April, including shipments to the EU and China, she said.

According to Bloomberg data, the palm oil discount for diesel reached around US$$106/t on March 14, the highest level since November, compared to the average discount of around US$66/t in 2018.
 
The Malaysian Reserve said SME imports from China grew nearly 50 times to 751,056 tonnes last year, thanks to low pricing.

Source: OFI Magazine

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