Viewpoint: Asian biodiesel supplies to tighten

  • : Biofuels
  • 19/12/24

Southeast Asian first-generation biodiesel will become increasingly insular in 2020, in the wake of the two biggest palm oil producers Indonesia and Malaysia hiking domestic production mandates in response to anti-palm oil sentiment from their previous largest export market Europe.

The EU's new renewable energy directive will phase out palm-oil based biofuels by 2030. Individual countries have already imposed their own restrictions because of environmental and sustainability concerns.

Europe also slapped 8-18pc anti-subsidy duties on Indonesian biodiesel in August 2019, effectively closing the arbitrage. While Jakarta has filed a complaint with the World Trade Organisation the matter could take years to resolve, much as it did when the EU imposed anti-dumping duties against it in 2013 that were only overturned in 2018.

As a result, Indonesia is switching to a 30pc (B30) biodiesel mix in transport as of 1 January 2020 from B20 currently. Malaysia will be phasing in a B20 mandate over the course of the year from its current B10 standard.

Mandates squeeze capacity

The increases will result in domestic biodiesel consumption hikes to around 8.47mn t/yr from 6.58mn t/yr in Indonesia and to 1.2mn t/yr from 700,000 t/yr in Malaysia, straining domestic producers' capacity and leaving little left for exports.

Indonesia has a domestic nameplate capacity of around 9.3mn t/yr, so producers will need to run at around 90pc to meet their requirements. There are plans to expand this to 10.4mn t/yr by 2021, but then Jakarta is also pushing to boost its blending mandate yet again to B40 the same year, which will mean all output will remain within the country.

Malaysia has 2mn t/yr of production capacity, so will have enough spare to maintain exports to Europe and China. But it could find foreign sales further hindered from the knock-on price effects on feedstock palm oil.

Malaysian biodiesel exports totalled 604,000t during January-September 2019, of which 172,000t went to China and almost all the rest headed to Europe.

Indonesian producers — which can operate more cheaply than their Malaysian counterparts because of economies of scale — sold more than 1mn t/yr during the same period. Of this, 54pc went to China and 45pc to the EU, as well as sporadic volumes to India and South Korea.

But while the opportunity to take market share is there for Malaysian producers, higher palm oil costs are closing the arbitrage.

Rising costs complicate

Crude palm oil prices have increased from four-year lows of around $470/t on the fob Bursa Malaysia exchange in July 2019 to near three-year highs of more than $700/t in early December, as Indonesian biodiesel producers increased production in preparation for B30. The trend may only continue as the new policy gets under way and Malaysia begins to phase in B20.

Europe may continue buying PME given higher mandates coming in during 2020. But the biggest market loss will likely be China, which has no biodiesel directive and so only buys if it makes economic sense when palm oil values are around $120/t below that of gasoil.

But the price hike has shifted the spread between palm oil and gasoil from -$140/t in July 2019 to more than $120/t in early December, killing off any PME demand.

A severe slump was already seen at the end of the July-September 2019 quarter, when Indonesian exports to China dropped from 187,000t in July to just 52,000t in September, while Malaysian sales ceased completely in August and September from 50,000t in July.

Waste takes up slack

The lack of cheap PME has been causing Chinese oleochemical manufacturers to bid up homegrown used cooking oil (UCO) feedstock, so forcing up export prices of the feedstock and finished UCO methyl ester (Ucome) biodiesel to Europe.

Tightening UCO supplies in China have pushed bulk export values up by $140/t since June 2019 to $725/t in early December, while Ucome rose higher to $1,025/t from $830/t over the same period.

Suppliers have been further encouraged to keep raising offers as values in Europe have hit their highest levels since Argus records began in August 2013, reaching more than $1,410/t fob ARA.

Demand for UCO and Ucome will remain firm as European targets continue to rise in 2020 and waste grades count double towards mandates, although some traders question how high buyers will follow increasing offers out of China.

Chinese biodiesel exports hit a record high 72,000t in July 2019 compared with 50,000t a year earlier. This fell off to 41,000t by October but this was still more than double the exports recorded during the same month in 2018.

UCO sales managed a record 88,000t in August 2019 against 67,000t for the same month in 2018, although this eased off to 68,000t by October as it was during the same month in 2018.

To meet higher mandates and combat rising China prices, European buyers are looking elsewhere for waste feedstocks, particularly southeast Asia where Indonesia and Malaysia remain relatively untapped for their UCO potential, as well as palm oil mill effluent (POME).

But UCO infrastructure will take time to build, and while POME volumes are rising it remains a risky prospect for many as product quality can vary greatly.

By Amandeep Parmar


Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/06/24

CPC to import Taiwan's first SAF for 2025 trial

CPC to import Taiwan's first SAF for 2025 trial

Singapore, 24 June (Argus) — Taiwan will supply its airlines with sustainable aviation fuel (SAF) for the first time in first-half 2025, as part of a pilot project to hasten carbon emissions reductions in aviation and meet its net zero goals. There are plans for state-owned refiner CPC to import and supply SAF to national airlines at Taoyuan International Airport and Taipei Songshan Airport during January-June 2025. The volumes and airlines have not been confirmed, said a company source. Taiwan's Civil Aviation Administration (CAA) also encourages Taiwanese airlines to target 5pc SAF use by 2030, given the International Civil Aviation Organisation's (ICAO) aim of achieving a 5pc cut in carbon dioxide emissions in international aviation by 2030 compared with a business as usual scenario. The CAA said it has been working with the relevant ministries, oil companies, airlines and airports to understand their needs regarding domestic supplies of SAF. It is also in the process of ensuring facility certification and implementing supporting measures in airlines and aircraft. The SAF used in trials next year must have been certified by an ICAO-authorised agency, including details such as oil pipelines, its import sources, oil storage tanks, vessels and tanker trucks transporting the oil. CPC is now settling certification work for each step of the import process. The SAF will also be certified by the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia), a global scheme to reduce international aviation emissions, which airlines can directly use it to reduce their carbon emissions. The CAA has strategies to decarbonise Taiwan's aviation sector. These are reducing fuel consumption through measures like optimising flight routes and encouraging airlines to replace old aircraft with new models. It also aims to step up energy conservation and carbon emissions reductions in airport operations and management, encourage airlines to use SAF and promote compliance with Corsia's emissions requirements. The CAA updated Taiwan's civil and general aviation regulations last year to include laws on carbon emissions reporting in compliance with Corsia. Taiwan's airlines this year reported their carbon emissions for the first time for the year 2023, which the administration is also currently reviewing. By Sarah Giam Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil's Raizen ships 2G ethanol cargo to EU


24/06/20
24/06/20

Brazil's Raizen ships 2G ethanol cargo to EU

Sao Paulo, 20 June (Argus) — A second generation (2G) ethanol-producing unit of Brazil's top sugar and ethanol milling group Raizen — known as Bonfim Bioenergy Park — shipped its first cargo of 2G ethanol to the EU, vice-president Paulo Corte-Real Neves said. "We were already exporting E2G produced at the Costa Pinto unit," Neves said during the Argus Biofuels and Feedstocks Latin America conference, in Sao Paulo, Brazil. "Now, with the Bonfim plant, we have increased our relevance with customers and expanded the penetration of cellulosic ethanol." Bonfim Bioenergy Park is Raizen's second unit to sell 2G ethanol. The first is Costa Pinto Bioenergy Park. Both are in Sao Paulo state and produce a combined 112mn liters/yr (1,940 b/d), chief executive Ricardo Mussa said in May. Raizen said last year it sold 80pc of Bonfim's output to international markets. It now expects to sell the remainder on the EU ethanol spot market. Raizen, a joint venture between Shell and Brazilian conglomerate Cosan, has plans to have 20 2G ethanol units in operation in 10 years, with total installed capacity reaching up to 1.6bn l/yr (27,750 b/d) when works are finished. By Maeli Prado Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s MGC produces bio-methanol from sewage gas


24/06/20
24/06/20

Japan’s MGC produces bio-methanol from sewage gas

Tokyo, 20 June (Argus) — Japanese petrochemical producer Mitsubishi Gas Chemical (MGC) has begun commercial output of bio-methanol by using sewage gas at its Niigata plant in northwest Japan's Niigata prefecture, in its latest project to decarbonise methanol manufacturing. It buys sewage gas, consisting of methane and carbon dioxide (CO2), from Niigata prefecture's Niigougawa sewerage plant. But the volume of bio-methanol produced is inconsistent and limited, it said. Output of bio-methanol could be a minimum 1 t/d but is unlikely to exceed 10 t/d, depending on the feedstock volumes MGC can purchase, it added. The sewerage plant uses the gas for power generation. MGC is still looking for buyers of its bio-methanol, although it said it has found some potential users. It expects domestic sales as output is too low for exports. The company expects its bio-methanol to be used as petrochemical feedstock, marine fuel and power generation fuel. The company has also explored the feasibility of methanol production from CO2 and green hydrogen in partnership with Cement Australia. Japan's methanol consumption has been around 1.7mn-1.8mn t/yr, according to MGC, with demand expected to grow further. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Petrobras estuda novos insumos para biocombustíveis


24/06/19
24/06/19

Petrobras estuda novos insumos para biocombustíveis

Sao Paulo, 19 June (Argus) — A Petrobras estuda usar matérias-primas alternativas para abastecer duas refinarias de biocombustíveis previstas no seu plano estratégico 2024-28, disse o gerente de negócios de produtos de baixo carbono da estatal, Mario Gheventer, durante participação na Argus Biofuels and Feedstocks Latin America. A Petrobras vai construir biorrefinarias no polo GasLub, no Rio de Janeiro, e outra no município de Cubatão (SP), onde produzirá e combustível sustentável de aviação (SAF, na sigla em inglês), óleo vegetal hidratado (HVO, na sigla em inglês), entre outros produtos. As duas unidades terão uma capacidade produtiva combinada de 34.000 b/d em biocombustíveis, com a possibilidade de alternar a fabricação entre os dois produtos. A Petrobras está considerando usar uma variedade de matérias-primas na produção, como óleo de soja, sebo de boi, óleo residual de etanol de milho (TCO, na sigla em inglês), óleo de macaúba e óleo de cozinha usado (UCO, na sigla em inglês), disse Gheventer na conferência. O CEO da Acelen, Luiz de Mendonça, também citou o óleo de macaúba como uma matéria-prima possível para se produzir biocombustível, durante a conferência da Argus. Gheventer avalia que cada matéria-prima tem seus próprios desafios. No caso do óleo de soja, por exemplo, fica a dúvida sobre o que fazer com o farelo de soja remanescente. O óleo de macaúba exige entre quatro e cinco anos para o início da produção, por causa do tempo que a planta leva para dar frutos. Já o UCO requer "logística reversa" para ser coletado, citou Gheventer. Ele mencionou outros óleos vegetais, como canola, girassol e algodão, como possíveis matérias-primas. Mas ressaltou que estes serão "monitorados no mercado à vista para se tirar vantagem das oportunidades de preço", disse. Em um painel mais cedo, o presidente da Associação Brasileira das Indústrias de Óleos Vegetais (Abiove), André Nassar, classificou o óleo de canola como uma promissora matéria-prima para biocombustíveis. Gheventer falou que será necessário criar mais caminhos para certificar os níveis de emissão de biocombustíveis. Na sua visão, há poucas opções e o mercado está precisando de mais pessoas para certificar biocombustíveis. A Petrobras mais que dobrou sua projeção de investimentos na área de biorrefino, de US$ 600 milhões para US$ 1,5 bilhão, no seu plano estratégico mais recente divulgado em novembro de 2023. Diesel R5 Gheventer disse ainda que a Petrobras deverá manter a mescla atual de óleo vegetal no seu diesel R por questões de logística e armazenamento. O diesel R é produzido a partir do coprocessamento do combustível fóssil com óleos vegetais, contendo. A mescla de 5pc de conteúdo renovável leva o nome de R5. Para o gerente, a empresa pode considerar a elevação da mistura, mas não se trata de uma prioridade. Por Lucas Parolin Envie comentários e solicite mais informações em feedback@argusmedia.com Copyright © 2024. Argus Media group . Todos os direitos reservados.

Acelen aposta na macaúba para gerar biocombustível


24/06/19
24/06/19

Acelen aposta na macaúba para gerar biocombustível

Sao Paulo, 19 June (Argus) — A Acelen, subsidiária brasileira do fundo soberano árabe Mubadala, planeja usar a macaúba, uma palmeira nativa brasileira, para produzir biocombustíveis, disse o CEO Luiz Mendonça na conferência Argus Biofuels and Feedstocks Latin America. A empresa quer estabelecer uma floresta permanente de 180 mil hectares para plantar macaúba, disse Mendonça na conferência, que acontece entre hoje e amanhã em São Paulo. A maior vantagem da macaúba é que a planta pode produzir 7-10 litros/hectare a mais de biocombustíveis do que a soja, acrescentou ele. As palmeiras podem ser cultivadas no cerrado, bioma presente em cerca de 25pc do País. A palmeira também pode crescer em áreas de plantio devastadas, o que agrada os mercados americanos e europeus, disse o executivo. Mendonça também falou que a macaúba pede pouca água, começa a dar frutos em 3-4 anos e pode produzir por 30-40 anos. A palmeira ainda pode gerar outros subprodutos para setores de cosméticos, polímeros e alimentação animal, entre outros, o CEO acrescentou. A Acelen informou, no ano passado, que planeja construir uma biorrefinaria na Bahia para produzir óleo vegetal hidratado (HVO) e combustível sustentável de aviação (SAF) para o mercado de exportação. A biorrefinaria deverá começar a operar em 2026 e terá uma capacidade de produção de 20 mil b/d de HVO e SAF. A empresa pretende investir até US$ 2,5 bilhões na nova refinaria ao longo da próxima década. Inicialmente, a planta usará óleo de soja e de milho como matéria-prima, e fará a transição para o óleo de palmeira dentro de 3-4 anos. Mas a macaúba não é uma "arma mágica" para aumentar a produção global de biocombustíveis, disse Mendonça. "Outras empresas estão pesquisando outras coisas. Se vamos [ampliar a produção de biocombustível], será um esforço conjunto. Todos estão contribuindo", falou. Combustível do Futuro O CEO disse que o programa Combustível do Futuro foi importante para aumentar a produção de biocombustível, mas é apenas um primeiro passo de um longo caminho. Mendonça se disse cético sobre o programa, já que não oferece mandatos claros para o setor. "O Brasil está atrás do resto do mundo" no assunto, ele afirmou. Por Lucas Parolin Envie comentários e solicite mais informações em feedback@argusmedia.com Copyright © 2024. Argus Media group . Todos os direitos reservados.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more