Malaysian biodiesel, UCO trade rebounds in August

Malaysian biodiesel exports rose to their highest monthly volume since July 2019 at 66,000t in August, after a short-lived plunge in crude palm oil (CPO) futures narrowed the palm oil-gasoil (POGO) spread in June.

The drop in CPO futures spurred a selloff of July-August loading palm methyl ester cargoes to Europe.

The third-month Bursa Malaysia-listed CPO contract dipped to a recent low of 3,358 ringgit/t ($811/t) at Singapore closing on 17 June, as the prospect that improved weather would boost US soybean harvests weighed on the global vegetable oil complex. The drop in CPO pinched its premium to Ice gasoil to a low of $217/t on the same day, more than half its level a month prior. The POGO has spent just 15 days out of this year under $300/t, a threshold it last broke only briefly in early 2016, effectively pricing palm-based biodiesel out of the EU market for much of this year.

Spurred by favourable economics, August biodiesel sales to Spain grew by 155pc, and to the Netherlands by 74pc on the year to 28,000t and 14,000t respectively. The UK took its first cargo since January 2018 at 9,000t, while Hong Kong received its largest ever volume at 6,000t. But exports to China dropped slightly by 10pc on the year to 5,000t.

Malaysian used cooking oil (UCO) trade activity also rebounded in August, driven by tight supplies and recovering UCO methyl ester (Ucome) profit margins in Europe.

Monthly exports nearly trebled on the year to 71,000t, exceeding imports by over 22,000t to make Malaysia a net-exporter of the waste biodiesel feedstock for the first time since April. This also tipped Malaysia's scale to a net-exporter for the year to-date, from its net zero trade balance the month prior.

Flows to the Netherlands ramped up the most, rising almost five-fold on the year to 41,000t, and pushing total Malaysian sales to the country to 184,000t for January-August, almost double those over the same period last year.

Spot UCO prices peaked at new all-time highs across origins in June this year, squeezing UCO methyl ester margins and directing producers at the Amsterdam-Rotterdam-Antwerp (ARA) hub increasingly towards southeast Asian cargoes, which sell at a discount to Chinese cargoes on account of poorer cold weather properties.

UCO exports to Singapore also increased by nearly five times to 16,000t, and those to the UK doubled to 6,000t in August.

Imports of the feedstock increased more marginally by 18pc on the year to 49,000t, with shifts in trade flow patterns between countries largely mirroring previous months as Malaysia solidifies its position as a regional bulking hub. Receipts from Indonesia rose by three-quarters on the year to 17,000t, while Thailand sent 7,000t compared with just 500t in August last year. By contrast, imports from China continued their downward trajectory, falling by 72pc on the year to 7,000t in August.

By Lauren Moffitt