European biodiesel production margins are expected to come under significant pressure into the summer, with imports due to arrive in May and June expected to weigh heavily on prices, despite a recent falling euro easing prompt margins.
This could prompt some increased demand on the spot market as producers look to cover potential shorts stemming from these tight margins.
These imports, from Argentina, Malaysia and Indonesia, are due to put added pressure on production margins as the market in Amsterdam-Rotterdam-Antwerp lengthens, with almost 500,000 mt expected to arrive in Europe by the end of June.
This comes as some Southeast Asian producers are reportedly sold out until the end of July, adding to the bearish European sentiment.
The weaker euro/dollar relationship on the prompt, however, has widened production margins somewhat, as the euro fell to it's weakest level against the dollar for over three-months at $1.2001 16:30 London time Tuesday, S&P Global Platts data showed.
This has had an impact in the biodiesel market as feedstocks are bought in euros in Europe and and the final product sold in dollars.
With most antidumping duties against Argentina and Indonesia removed in March, the door has been opened for imports into Europe, with some market participants expecting in the region of 1.5 million mt of biodiesel to be imported over the course of 2018.
With European demand expected to be in the 13 million mt range for 2018, this represents over 10% of the market to be supplied by imports from Argentina and Southeast Asia.
This is notwithstanding the potential UCOME imports from China over the course of the year, expected to be in the region of 500,000 mt, further fueling the pessimistic sentiment looming over European biodiesel producers.
Some respite in margins has also been seen with largely bearish vegoils across the globe in recent weeks and months, as seen with front-month CBOT soybean oil futures falling to 30.08 cents/lb at 16:30 London time Tuesday, the lowest in almost two years, and a fall of 3.37% on the week.
Despite the anticipated imports, the market has reached a period of relative prompt tightness where demand is outweighing supply, causing prices to rise. But this is expected to be short-lived.
The FAME 0 outright price rose to an over five-month high Tuesday at $874.50/mt FOB ARA on seasonal demand for the summer-grade product, as RME hit $880.50/mt FOB ARA, a two-month high despite waning seasonal demand. - Platts -