By Felicia Loo
SINGAPORE (Reuters) - Asian palm-based biodiesel exports to the United States and Europe could slow this year because of soaring exports from Argentina and record-high palm oil prices, a senior industry executive said on Tuesday.
Physical trading of palm-based biodiesel in Malaysia and Indonesia had slowed to a trickle in recent weeks as crude palm oil rose to successive record highs, said Laren Tan, executive director of brokerage firm Ginga Global Markets.
And as the palm oil market surges, U.S. buyers are finding it attractive to purchase soy-based fuel from Argentina, compared with Southeast Asian palm-based products, Tan told the Reuters Global Agriculture and Biofuel Summit.
"Many buyers have shifted to Argentina," said Tan. "The Southeast Asian market has been quiet for the past six months, as seen from the wide spread between bid and ask levels."
Asian palm-based biodiesel exporters are currently quoting offer prices at around $1,100 a tonne, while buyers are keen to seal deals only around $900 a tonne. The spread was much lower at $20-$40 a year ago.
Argentina exports almost 90 percent of its biodiesel production. Low labor costs and lower transportation costs were also aiding Argentine exports, Tan said.
Malaysia exported 150,000 tonnes of palm biodiesel to Europe, Asia and the United States in 2007, according to industry officials. Malaysia's palm oil exports to the EU fell 20.2 percent between January and November to 1.9 million tonnes from a year ago period, Malaysian Palm Oil Board official data showed.
SOARING PALM OIL PRICES
Tan said Southeast Asian biofuel makers were struggling in the face of record palm prices and this could lead to takeovers in the region. At current palm oil prices, biodiesel companies that also own the feedstock would be the only ones to survive.
"I expect some consolidation in the Asian industry. There is no strong demand for palm biodiesel," Laren said.
Sime Darby (SIME.KL: Quote, Profile, Research, Stock Buzz) became Malaysia's most valuable stock after being listed in November following a merger between three plantation companies.
Malaysian crude palm oil futures hit a new peak of 3,420 ringgit ($1,050) a tonne on the Bursa Malaysia Derivatives Exchange on Monday, up nearly 12 percent since the start of the year, spurred by a rally in U.S. soybean oil and growing supply concerns.
Crude palm oil, the main ingredient for biodiesel, now costs just over $1,000 a tonne, while petroleum-based diesel fuel trades at about $780 a tonne in Singapore.
Tan said with most Asian governments dragging their feet on making the use of biodiesel mandatory, the market is unlikely to see a pick up in domestic demand anytime soon.
"There hasn't been much change over a year. Biodiesel is still a buyers' market," said Laren. Continued...
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