European biodiesel premiums at over six-month lows as global vegoils fall

21.02.2017

Biodiesel premiums in Europe ended last week at their lowest in over half a year as global vegoils continued their downwards trend.

European biodiesel premiums over ICE gasoil were assessed Friday at more than six-month lows, with FAME 0 (fatty acid methyl ester) at $432/mt and RME (rapeseed methyl ester) at $450.25/mt, according to S&P Global Platts data.

This move came as global vegoils continued to fall, with the soybean oil market losing 4.9% on the week to close at 32.97 cents/lb, the lowest in more than four months.

The fall in soybean oil came as weather forecasts of dry weather that should aid the crop sent prices plunging.

A source said that the fact that there is "less demand and more soybean supply" expected has caused the other global vegoils to fall in line in order to remain competitive.

Another factor causing the price to fall was the low Rhine levels -- an ongoing problem in the ARA region. Although water levels have risen in recent weeks, with the level at Kaub, a key reference point on the river, at 1.24 meters on Monday, they have fallen back from 2.31 meters on February 4.

"1.30 meters in Kaub does not allow you to load enough," said a source, adding that the maximum able to load at this point is currently 800 mt.

This has led to stocks building up in the Amsterdam-Rotterdam-Antwerp region, further weighing on prices.

"If you can't load fully, stocks will pick up," said a source.

At the same time as premiums have fallen, the underlying ICE gasoil contract has also dropped, further highlighting that prices for biodiesel are reacting strongly to the global vegoils.

As ICE gasoil falls, the natural market reaction would be for biodiesel premiums to rise, but as the inverse occurred, falling vegoils and increasing stocks look the most likely root cause.

This was further visible in the soybean oil-gasoil differential (BO-GO), an indicator for market strength, which fell to a near eight-month low on Friday, losing 9.1% on the week to $246.86/mt.


platts

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