The London- Europe RME biodiesel blend hit a nine-month high due to increased demand for winter grade products, while the previous ICE gasoline futures strengthened.
Standard & Poor’s Global Pratt evaluated RME (Rapeseed Methyl Ester) on a direct price of $1,006.50/tonne FOB ARA on Tuesday, up $14 on Monday, as the market showed strong offers, and buyers hope to mix with the European market.
In contrast, the summer grade biodiesel FAME 0 fell by $6 from Monday to $869.50/ton FOB ARA on Monday.
This is also accompanied by a bullish gasoline, which, despite the increase in European inventories, still supports direct biodiesel prices. On December 1, 2017, RME rose last time, and the previous month’s ICE gasoline futures evaluation price was 567.50 US dollars / ton.
However, the price rose to $685.50 / mt on Tuesday, making RME’s fuel premium at $321 / mt FOB ARA, and December 1 at $443.75/ton FOB ARA.
A source said on Tuesday that despite the strong market deficit, the market still needs to push the London Metal Exchange (RME) to still drive market demand.
However, although RME demand has risen to offset some of the decline in FAME 0 demand, the RME market is currently at the end of the year. “RME goes down the curve [forward] with increased crude oil supply, but due to the low economics of blending, Med may mix FAME 0 as much as possible during the winter, thus reducing RME demand,” said one source. Said.
The Mediterranean usually experiences a milder winter than other European countries, which means it will have a greater demand for FAME 0.
This spot price is basically not surprising at this time of the year, as a large amount of rapeseed oil enters the market after harvesting throughout Europe.
One source said, “People are now in the fourth quarter.” “When you know the harvest expectation of rapeseed, it is easier to get paper.”
As the spot production margin is still large, production is expected to increase further as raw material production is expected to decline. “As long as people pay for it, the profit will be great, because the summer grade [FAME 0] is unlikely to enter the fourth quarter, I suspect that RME-FAME 0 will jump back again,” one source said.
This was the case on Tuesday, when the FAME 0 premium on the London Metal Exchange expanded by $20 to $137/ton on the same day, the highest level since December last year. However, this is basically expected in the market, and the banknote swap prices of RME and FAME in October lasted for several weeks in the range of $135 to $140/ton.
Although the balance between harvest and expected supply and demand is further clarified on the curve, there are still uncertainties.
This stems from the expected decision on the countervailing duty on Argentina’s biodiesel imported into Europe, which will be announced in the coming weeks. If this decision would result in new tariffs on these imports after the European Biodiesel Board filed a complaint in December, it would close the arbitrage of producing biodiesel from Argentina into Europe.
It is also possible to apply retroactive tariffs 90 days ago, which may affect some of the volume of transactions that have been booked or delivered.