monthly biofuels presentation - s&p global · 2019-09-09 · 3 september, 2019 monthly biofuels...

MONTHLY BIOFUELSPRESENTATION

World Biofuels OutlookKingsman’s Monthly Update September 3, 2019

PRICES

3 September, 2019 MONTHLY BIOFUELS PRESENTATION 3

CS Brazil hydrous ethanol prices come off 3-month high on mills’ agressive selling end-Aug on cash flow need

• Hydrous prices are still 4% higher on the year and didn’t bottom out when the peak of the cropwas reached in the second half of July.

• Petrobras increased ex-refinery gasoline prices by 3.5% on August 28, which should besupportive of ethanol prices.

1,500

1,800

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2,700

Apr Jun Aug Oct Dec Feb

Real/cu m

Brazil Hydrous Ethanol Prices (ex-mill Ribeirao Preto)

2018-19 2019-20Source: S&P Global Platts


European ethanol prices drifting since end-July, tracking US’ move lower

• This is the first decline since February, but prices remain higher on the year.

• August prices averaged €575.02/cu m, up 41.4% year on year.

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525

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575

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650

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

T2 FOB Rotterdam: Monthly Average

2019 Average 2012-2018 Average

€/cu m

Source: S&P Global Platts


European RME up as market looks to Q4 when RME supported by better cold qualities

• RME premiums over ICE gasoil in August averaged $458.17/mt up 68.36%, from July.

• By contrast, FAME0 edged down on low-priced PME imports to average $230.01/mt, down11.65% on the month.

100

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900

European biodiesel premiums

FAME 0 RME

$/MT


- Winter grade requires high

RME blend

- Record low Rhine water

levels caused by drought


US biodiesel prices reach 6-month high in Aug; Platts’ model biodiesel plant manufacturing margins return to positive numbers

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290

Mar-19 Mar-19 Apr-19 May-19 May-19 Jun-19 Jul-19 Jul-19 Aug-19

Chicago ULSD Chi BioD


US Biodiesel Pricescents/gal


Indonesian biodiesel index below FOB SE Asia prices

• Indonesia’s domestic Biodiesel Market Price Index increased to 48.5 cents/liter inSeptember from 47.6 cents/liter in August, equivalent FOB SE Asia prices in August were52.7 cents/liter

• In 2019, domestic biodiesel prices were on average 4 cents/liter lower than FOB SE Asia

• On August 29, the Indonesian Coordinating Minister for Economic Affairs announced thatthe country may begin implementing B30 as early as October or November

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$0.45

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$0.70

Biodiesel Prices, Indonesia vs. SE Asia

Platts Biodiesel FOB SE AsiaIndonesia, Biodiesel Market Price Index

Source: MEMR, S&P Global Platts Analytics

US$/liter


Indonesian ethanol index well above CIF Philippines

• Indonesia’s domestic Ethanol Market Price Index fell to 70.6 cents/liter in September from71.4 cents/liter in August 2019, well above CIF Philippines 47.8 cents/liter

• In 2019, domestic ethanol prices were on average 24 cents/liter higher than CIF Philippines

• Indonesia’s ethanol price index mirrored Thailand’s ethanol price index which averaged 71cents/liter in August

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$0.50

$0.60

$0.70

$0.80

$0.90

Ethanol Prices, Indonesia vs. CIF Philippines

Indonesia, Ethanol Market Price Index

Platts Ethanol CIF Philippines

US$/liter

Source: MEMR, S&P Global Platts Analytics

2019

CIF Philippines

24 cents cheaper on average

FUNDAMENTALS&TRADE FLOWS


• January-July gasoline C (with a 27% anhydrous blend) demand fell 5% year on year.

• January-July otto cycle fuel demand in Brazil (in gasoline C equivalent volume) rose 3.5% to 30.5 billion liters. S&P Global Platts Analytics forecasts a 3.6% rise in 2019 otto cycle demand.

Brazil hydrous ethanol consumption hits record high for a July and surged 16% on the year. Jan-Jul up 30% on year

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0.5

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2.0

2.5

Jan Mar May Jul Sept Nov

Brazil Hydrous Consumption

2017 2018 2019 5-year average Forecast

Source: ANP/S&P Global Platts Analytics

billion liters


CS Brazil ethanol stocks much lower on year despite recent peak of 2019-20 output

• Based on Platts Analytics forecast for demand in August, total stocks in CS Brazil by mid-August would have been equivalent to 92 days of consumption compared with 118 a year earlier.

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14/15 15/16 16/17 17/18 18/19 19/20

CS Brazil Ethanol Stocks by mid-August

Anhydrous HydrousSource: MAPA

billion liters

hydrous: -22% y-o-y

anhydrous: -15% y-o-y


US ethanol stocks briefly rise above 1 billion gallons despite facilities either shutting down or cutting output

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Jul-18 Sep-18 Dec-18 Mar-19 May-19 Aug-19

US Ethanol Stocksmillion barrels

Source: EIA


US ethanol margins rebound, but low returns still led to production cuts in August

• S&P Global Platts Analytics forecasts that US ethanol production will fall in 2019, which would bethe first drop since 2012. We have maintained this position since January.

• We expect output to drop to 1.031 million b/d (15.81 billion gallons), down 2% from 2018.

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Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19

cents/gal

US Ethanol Manufacturing Margins


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1,120

Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19

Source: EIA

thousand barrels/day

-7%

US Ethanol Production


German H1 ethanol demand down 5% on year at 717 million liters on high T2 prices

• With high ethanol prices this year, German blenders are looking to high greenhouse gas savings material to meet the mandate. The larger the share of high-GHG-savings feedstock, the lower the volume of ethanol required in the fuel mix.

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German Ethanol Consumption

2016 2017 2018 2019

mln liters

Source: HM Revenue & Customs


India ethanol production hits record high in August

• In August 2019, India’s state-owned oil marketing companies lifted 1.58 billion liters of ethanol, arecord high that surpassed 2017-18’s 1.50 billion liters

• According to the Indian Sugar Mills Association, the average ethanol blending percentage (as ofAugust) was 5.7%

• Platts Analytics projects a fuel ethanol output of 2.25 billion liters and blending rate of 5.3%

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Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19

India: Ethanol Production, 2019mil liters

2.25 billion liters forecast

or 92% lifted against

quantity contracted

Source: ISMA, S&P Global Platts Analytics

Nov-19

(Contracted)


Irish July biodiesel demand up 33% on year to record high 17,327 mt on low FAME0 prices

• In 2019, we expect biodiesel demand in Ireland to be 160,000 mt, up from 143,000 mt last year, as a result of growing diesel demand and the biofuels mandate being raised to 11.111% from 8.695%.

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Ireland: Biodiesel demand

2016 2017 2018 2019

'000 mt

Source: NORA


California biomass-based diesel use at record high

Source: CARB

-

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400,000

600,000

800,000

1,000,000

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1,400,000

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1Q

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Q2

Q3

Q4

201

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Q2

Q3

Q4

201

3Q

1

Q2

Q3

Q4

201

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1

Q2

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201

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Q2

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201

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201

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9Q

1

California Low Carbon Fuel Standard Credits generated by Biomass-based diesel

Renewable Diesel Biodiesel

metric tons

+11%

• Renewable diesel made up 26% of the total volume of clean fuels in California (includingbiofuels, renewable natural gas, electricity and hydrogen) and 36% of the total LCFS creditsgenerated in the first quarter.


Argentine biodiesel exports lowest in a July since 2008. Temporary fuel price liberalization could cut mandatory blending

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Thousands

Argentina Biodiesel Exports'000 mt

Source: Ministry of Energy


China July biodiesel imports rise for fourth consecutive month

• China imported 199,419 mt of biodiesel in July, a 28% increase from June

• Malaysia supplied 63,320 mt, a record high, according to China Customs

• Imports are forecast to fall in the coming months due to the onset of winter and Indonesia’sB30 initiative

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China, Biodiesel Imports

Indonesia

Malaysia

Others

tons '000s

Source: S&P Global Platts Analytics, General Administration of Customs, PRC

+28%

+60%

ExpectedDecline

- Seasonal

(Winter)

- B30 in

Indonesia

REGULATORY


Brazil ethanol import quota renewed and increased to 750 million liters/year

• Brazil’s ethanol import tariff free quota increased to 750 million from 600 million liters/yearas of September 1 for 12 months. S&P Global Platts Analytics does not expect an impact onBrazilian imports until 2020, most probably replacing part of the flow from the CS regionduring its intercrop period (January-March).

• Brazil’s North-Northeast region -- where most imports enter -- has a structural deficit of2.35 billion liters.

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Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19

Platts Anhydrous DAP Suape

20% import tariff

with quota (tariff free)

Real/cu m

Brazil NNE: Ethanol Price & Import

Arbitrage



RIN prices collapse after 31 small refinery hardship waivers granted for 2018 complaince year

• The decisions for 2018 exempted 13.42 billion gallons of fuel (gasoline/diesel) and 1.43 billionRINs.

• President Donald Trump has been sharply criticized by the corn and ethanol industriesrecently and he promised a “giant package” for ethanol in a tweet dated August 29. Themost likely scenarios include increasing the renewable fuel mandates for 2020 and beyond,and reallocating waived volumes going forward.


Brazil biodiesel mandate rises to B11 as of September; Output surges to 9-month high in July

• The increase is part of a wider plan to boost the biodiesel blend to 15% by 2023 in annual 1-percentage-point increases. Platts Analytics estimates that a 15% mandate would pushBrazil's biodiesel consumption to around 10 million cu m a year.

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2015 2017 2019* 2021* 2023* 2025*

Thousands

Brazil Biodiesel Consumption

´000 mt

Source: ANP/*S&P Global Platts Analytics Forecast


EU announces provisional anti-subsidy duties on Indonesian PME

• The rates range from 8%-18% depending on the company and went into effect on August 13. The measures will be applied up to the end of 2019.

• The five-year anti-dumping duty imposed on Indonesian PME was withdrawn in March 2018, leading to an immediate increase in EU biodiesel imports from there. Biodiesel imports from Indonesia were 785,000 mt in 2018, up sharply from 25,000 mt in 2017. For 2019, Jan-May shipments into Europe hit 552,300 mt compared with 161,700 mt a year earlier. European blenders have been maximizing the use of palm oil in FAME given that 2019 is a cap year for biodiesel made from palm oil.

• We do not expect a major impact of these provisional duties for this year as Europe will soon enter colder months and will switch to winter-grade fuel blends, where typically PME’s share shrinks from about 50% in the summer to 5% or less.

• The deadline for definitive measures is set for January 6, 2020. This would certainly limit the flow of PME into Europe.


If you have questions or comments, please contact us:

[email protected]

[email protected]

Prepared by:

Beatriz Pupo

Corey Lavinsky

Kathlyn Saillen

Loren Puette

mailto:[email protected]

mailto:[email protected]


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monthly biofuels presentation - s&p global · 2019-09-09 · 3 september, 2019 monthly biofuels...

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