Declining Demand Triggers Drop in Global Biodiesel Prices

With the week ending on 03rd May, the price of Biodiesel in Indonesia fell by 1.3%, from USD 1170 per metric ton to USD 1155 per metric ton. This drop in price is largely attributed to a decrease in buying activities, reflecting a lower demand for Biodiesel. This demand drop coincides with a fall in the price of Palm oil, which is the primary raw material used to produce Biodiesel. Notably, Malaysian palm oil futures have shown a decrease due to reduced yields, a trend expected to continue into the near future. Although the prices of palm oil have decreased, leading to lower costs in producing Biodiesel, the prices have subsequently dropped. Both Indonesia and Malaysia, being the largest producers of palm oil, greatly influence the global market for this commodity. Their increased exports have led to a greater availability of palm oil, further driving down the production costs for Biodiesel producers in the region.

In Europe, specifically at Rotterdam, the Free on Board (FOB) prices of Biodiesel have decreased by almost 2% to USD 1040 per metric ton. The reduction in these prices can be attributed to a weakened demand for Rapeseed oil, which is another vital raw material for Biodiesel. This downturn in procurement may be due to expectations of further price decreases or suppliers waiting for more favourable pricing conditions. Additionally, the onset of warmer weather usually leads to reduced demand for heating fuels, including Biodiesel, thereby affecting consumption rates in the energy sector negatively. In Germany, the Biodiesel price impact is connected to a weak stock of feed palm oil. This scenario arises from the Biodiesel industry reducing its palm oil purchases, driven by an anticipation of lessened demand. Despite these trends in palm oil, Paris rapeseed futures have maintained a strong position. This indicates that while palm oil faces decreased demand, rapeseed oil remains in high demand, which might sustain or increase its price, potentially affecting the Biodiesel pricing differently across the market.

According to ChemAnalyst, Biodiesel prices are expected to decline in the forthcoming weeks as market demand for Biodiesel continues to decrease. Oil prices are anticipated to stabilize as discussions between Israel and Hamas offer hope for a ceasefire, even though attacks in the Red Sea persist. Meanwhile, investors are likely to look for indications of future U.S. interest rate decisions at an upcoming key meeting. Palm oil prices could be influenced by price movements in related oils, as these compete for market share in the global vegetable oils industry. An increase in inventories is expected to lead to a decline in prices, exacerbated by the low demand anticipated in the short term.