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Asia's biofuels prices at historic lows after year of pressure

London (Platts)--31 Dec 2014 122 am EST/622 GMT


Prices in Asian biodiesel and ethanol markets have endured a year of near constant pressure, taking average annual prices for 2014 to historic lows, Platts data showed Wednesday, December 31.

For the FOB Southeast Asia biodiesel assessment, the average price of $820.92/mt is the lowest seen since 2009, when the price averaged $721.31/mt, Platts data showed.

The CIF Philippines fuel grade ethanol assessment has averaged $669.46/cu m, the lowest average price recorded since Platts began assessing the market in March 2011, according to Platts data.

For ethanol, a significant source of direction is the US markets, with North America forming a natural resupply location to the CIF Philippines market.

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Prices through the year have loosely followed the trials of the US market, soaring to their highest point on April 10 at $745/cu m as a burst of US buying was augmented by local demand to provide support.

However, from that point onwards, prices have steadily tracked lower, bottoming out on October 3 at $567.67/cu m, as US ethanol inventories hit an 18-month high of nearly 19 million barrels.

Philippines ethanol prices rallied sharply through late October and November, peaking at the Thanksgiving weekend at $682.67/cu m.

OPEC's confirmation of its decision to maintain crude production output saw the entire energy sector lurch downwards, and biofuels were not spared.

By December 17, CIF Philippines prices had lost $100/cu m, to see out the year around the $585/cu m level.

BIODIESEL'S UNRELENTING DECLINE

For FOB Southeast Asia biodiesel, the price picture has been one of steadfast, unrelenting decline throughout the year.

From a peak of $912.50/mt on February 21, prices have broadly tracked the fortunes of crude palm oil prices, which have also seen steadfast declines through the year.

Where biodiesel has drawn support has been periods where CPO prices have been substantially below those of gasoil, and the period from March 19 through to August 29 saw CPO's discount to gasoil swell from $9.49/mt to peak at $251.23/mt.

That opened the door to discretionary blending, assisted by the outright price for biodiesel falling from $900/mt to $806/mt over the same period.

That interest supported the steady decline in biodiesel prices and smoothed out the more dramatic fall seen in the Bursa Malaysia's front month CPO futures contract, which lost a third of its value over the same time frame.

Platts data shows the contract saw out March 19 at MYR2,884 ($880/mt) but ended the period at MYR1,940 ($615.27/mt) by August 29.

Here too, however, the collapse in crude and gasoil prices post-OPEC decision drove a wedge between CPO and the energy complex, as heavy rain complicated palm oil production while mineral oil prices plunged.

That reversed the key CPO to gasoil relationship, seeing CPO rise to a premium over gasoil on December 4 which continued to widen through to December 30, when CPO contracts ended the day over $140/mt higher than ICE gasoil contracts.

At that level, any blending over and above mandated levels become economically no longer viable and biodiesel prices fell below $650/mt for the first time since April 1, 2009.

--Tim Worledge, tim.worledge@platts.com
--Edited by Wendy Wells, wendy.wells@platts.com

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