Palm kernel shell (PKS) suppliers in Asia have experienced a sudden surge of demand for large volumes from a number of European countries in recent weeks.
If this surge is sustained, such demand could put further pressure on PKS supply availability, which is already facing challenges from a low yield season.
Fresh spot demand for at least 150,000t of Indonesian PKS has surfaced since last week and one European company was looking for a term deal of up to 110,000 t/yr of Malaysian PKS in the week.
A trader sold a 50,000t cargo of PKS compliant with ISCC EU certification for sustainability for December loading in the $100s/t fob east coast Sumatra on 8 November to a European trader for shipping to Denmark, although Argus could not immediately confirm with the counterparty. This could be Indonesia's first export of PKS to the European country as there is no previous record of shipments to Denmark, according to customs data.
Another supplier received enquiries from Germany, asking for a large shipment of 70,000t of PKS. And a third Indonesian supplier received a bid last week for 30,000t of PKS to be delivered to ports in the Amsterdam-Rotterdam-Antwerp region.
Elsewhere, a Malaysian PKS supplier received an enquiry for a multiple-year term contract to provide two shipments of a combined 110,000 t/yr of PKS to Europe, with buying interest about $100/t fob peninsular Malaysia. The last shipment of Malaysian PKS to Europe was a receipt of 1,000t to Italy in June 2023.
Some exporters were concerned about sourcing and handling such large volumes, which require loading on bigger vessels via barges. Large volumes of PKS are much harder to accumulate and force aggregators to go further afield and source from a larger number of crude palm oil mills, resulting in larger transportation costs for large orders.
In comparison, previous purchases by European buyers of Asian PKS in the 10,000-25,000t range have been easier to handle. Current freight routes from Asia to Europe are likely to avoid the Suez Canal route because of security concerns. This rules out the option of loading on smaller geared dry bulk vessels which are not able to traverse the longer course along the African continent, a European trader said.
The additional costs for larger-sized cargoes put prices for traded material and ongoing talks at a premium to the current Argus spot PKS indexes.
An increase in European demand for large volumes of PKS cargoes could put pressure on the availability of PKS in the spot market during the low crop yield and rainy weather. Seasonal rains have already caused vessel congestion at ports in peninsular Malaysia and Sumatra.
Polish demand prospects
Some Asian suppliers remain puzzled by the sudden surge in European interest for PKS.
Some of the interest came from companies with trading activity in central European countries, suggesting at least some of the PKS could end up being marketed into Poland.
The Polish government submitted a draft law in July, which was expected to limit the scope of wood used in energy generation, which prompted Polish interest for other types of biomass in the following months, including PKS. While this draft remains under discussion, the final version approved by parliament is expected to be less restrictive.
Polish as well as other European companies in the energy or other manufacturing sectors could also be enquiring about the cost of PKS in preparation of their feedstock procurement strategy for 2025.
Poland has been an occasional buyer of PKS in recent years. Indonesia exported 2,600t to the country in 2023 and 25,000t in November 2022, during which year Polish demand peaked to make up for the deficit in supplies from Ukraine and Russia. And a 12,000t cargo was exported to a biorefinery in Portugal in January.
Combined PKS exports from Indonesia and Malaysia to Europe — namely the Netherlands, Portugal, Poland and Italy — totalled 41,000t in 2023, but these have been zero in the first nine months of 2024.
