APAC Biodiesel Prices Plunge Amid Global Market Shifts

During the week ending June 21, 2024, several pivotal factors contributed to the decline in Biodiesel prices across the APAC region. The downward trend was primarily driven by a significant drop in demand from Europe and other importing countries, strategic manoeuvres by traders, and seasonal adjustments in Biodiesel usage. This situation was aggravated by several factors, including various EU regulatory measures, regional oversupply, and weak demand, all of which increased the downward pressure on Biodiesel prices in the region.

During the week ending June 21, 2024, Biodiesel prices in the Chinese market dropped by 1%, from USD 1060/MT to 1050/MT. This marks the third consecutive week of decline, primarily due to a downturn in the Palm Oil market. The weakening of Palm Oil prices has significantly impacted the Biodiesel market. Additionally, strained EU-China relations threaten to escalate into a trade war, with the potential for severe deterioration if current trade tariffs between the two powers intensify. European leaders have criticized what they see as unfair competition in the global electric vehicle (EV) market, attributing it to significant subsidies from the Chinese government, leading to the imposition of trade tariffs and further straining economic ties.

Simultaneously, there has been a noticeable decline in demand for Biodiesel from European and other importing nations over the past three weeks. Several underlying factors have influenced the broader market trends. The Asian Palm Oil Alliance (APOA) has urged Hindustan Unilever (HUL) to reconsider its decision to reduce palm oil content in its products, contributing to the decline in palm oil prices and raising environmental concerns. The decrease in palm oil prices has been a significant factor in the overall drop in Biodiesel prices, as cheaper raw materials become available for production. Globally, Biodiesel output is expected to rise as producers take advantage of the lower raw material prices and work to absorb excess inventories. This decline is primarily due to reduced demand for Biodiesel and a drop in upstream palm oil prices.

In the Indonesian market, competing with Malaysia for a share in global Palm Oil sales, currently faces an oversupplied market. Palm oil prices have tumbled in recent months, partly due to trade restrictions imposed by India, one of the top buyers of vegetable oil, leading to a build-up of stocks. Indonesia's palm oil levies help finance the development of the country's palm-based Biodiesel program and other palm oil initiatives. However, many offshore vegetables oil refiners have shut down their plants in recent years. The removal of the levy is unlikely to alleviate the build-up of palm fruit stocks at the farm level or halt the drop in prices. Nonetheless, the temporary removal of these levies could improve Indonesian palm oil export competitiveness. The decline in the upstream market has led to cheaper raw materials for Biodiesel production, contributing to the reduction in Biodiesel prices. Reduced demand from downstream sectors, particularly transportation and industrial markets, has also significantly influenced this price decline. The current level of demand has been sufficiently low, allowing existing inventories in storage facilities to meet market needs without necessitating additional purchases.

According to projections from ChemAnalyst, Biodiesel prices are expected to decrease in the upcoming weeks. This anticipated downturn will mainly result from predicted reductions in demand from the downstream transportation sector. Ongoing restrictions on APAC Biodiesel in the European market will further contribute to this trend, likely extending their impact on prices. This pattern is anticipated to persist for several weeks ahead, indicating a continued decline in Biodiesel prices.