Argus editors analyse what to watch for in the biofuels markets as 2019 begins.
US ethanol production margins have improved amid lower ethanol production and higher domestic consumption, but lower production and higher demand have failed to shore up inventories, keeping ethanol prices pressured year-over-year. Exports to Brazil, Canada, and smaller markets have helped relieve stockpiles despite the retaliatory Chinese import duties on US-origin ethanol, while more optimism surrounding soybean exports has buoyed soybean oil prices, worsening the economics for producing soy methyl ester biodiesel. Higher D4 RIN credit prices could do little to support blending biomass-based biodiesel into the US fuel supply amid uncertainty with small refinery exemptions and the blender's tax credit (BTC). Total biomass-based diesel RIN generation has been trending lower than previous years because of the small refinery exemptions, which has strengthened D4 RIN prices and reduced biodiesel use.
Read our Viewpoint analyses for biofuels below.
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Viewpoint: Asian biofuels demand on the rise
Asian biodiesel exports should receive a boost if the EU carries through plans to impose anti-subsidy duties (ASDs) on Argentinian biodiesel imports – but higher biodiesel blend mandates in Malaysia and Indonesia may limit export quantities available in 2019.
Viewpoint: Asia's ethanol market faces uncertainty
Asia's ethanol market continues to face some uncertainty over China's buying appetite amid trade tensions between Washington and Beijing, even after a temporary truce was called in the six-month long US-China trade war.
Viewpoint: Duties to support EU biodiesel production
European biodiesel values should find support in the first half of 2019 from the European Commission's proposed definitive countervailing duty on Argentinian biodiesel and its proceedings to investigate Indonesian product on similar terms.
Viewpoint: Ethanol export barriers hit margins
US ethanol producers expect continued pressure from negative margins in 2019 as the industry struggles to export surplus fuel amid static domestic demand.
Viewpoint: Europe RSO supported by weak harvest
Global rapeseed supply and stocks will tighten towards the second quarter of 2019, a result of weaker harvests following drought in major producing regions. That will support prices for the seed and for end-product crude rapeseed oil (RSO).
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Viewpoint: India’s EV uncertainty confuses investors
India continues to oscillate between oil-fuelled cars and electric vehicles (EVs), driven on short-term market factors and external political factors, rather than focusing on a coherent policy on EVs. The lack of guidance is confusing investors in the thermal fuel, battery and EV industries.
Viewpoint: Little biodiesel blending help from D4 RINs
D4 RIN credit prices in 2019 will provide little support for blending biomass-based biodiesel into the US fuel supply amid weak production margins and uncertainty with small refinery exemptions and the blender's tax credit (BTC).
Viewpoint: US arb to limit EU ethanol
The US-EU ethanol arbitrage is open after the closure of two UK ethanol plants late this year. These shutdowns, allied with supply disruptions on the Rhine river in recent months, edged EU T2 spot ethanol prices towards two-year highs.
