MONTHLY BIOFUELS PRESENTATION - World Biofuels Outlook Kingsman's Monthly Update September 3, 2019 - S&P Global
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MONTHLY BIOFUELS PRESENTATION World Biofuels Outlook Kingsman’s Monthly Update September 3, 2019
PRICES
CS Brazil hydrous ethanol prices come off 3-month high
on mills’ agressive selling end-Aug on cash flow need
Brazil Hydrous Ethanol Prices
Real/cu m (ex-mill Ribeirao Preto)
2,700
2,400
2,100
1,800
1,500
Apr Jun Aug Oct Dec Feb
2018-19 2019-20
Source: S&P Global Platts
• Hydrous prices are still 4% higher on the year and didn’t bottom out when the peak of the crop
was reached in the second half of July.
• Petrobras increased ex-refinery gasoline prices by 3.5% on August 28, which should be
supportive of ethanol prices.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 3European ethanol prices drifting since end-July, tracking
US’ move lower
T2 FOB Rotterdam: Monthly Average
€/cu m
650
625
600
575
550
525
500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 Average 2012-2018 Average
Source: S&P Global Platts
• 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.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 4European RME up as market looks to Q4 when RME
supported by better cold qualities
European biodiesel premiums
$/MT
900
800
- Winter grade requires high
700 RME blend
- Record low Rhine water
600 levels caused by drought
500
400
300
200
100
FAME 0 RME
Source: S&P Global Platts
• 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 $230.01/mt, down
11.65% on the month.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 5US biodiesel prices reach 6-month high in Aug; Platts’
model biodiesel plant manufacturing margins return to
positive numbers
cents/gal US Biodiesel Prices
290
270
250
230
210
190
170
150
Mar-19 Mar-19 Apr-19 May-19 May-19 Jun-19 Jul-19 Jul-19 Aug-19
Chicago ULSD Chi BioD
Source: S&P Global Platts
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 6Indonesian biodiesel index below FOB SE Asia prices
US$/liter Biodiesel Prices, Indonesia vs. SE Asia
$0.70 Platts Biodiesel FOB SE Asia
$0.65 Indonesia, Biodiesel Market Price Index
$0.60
$0.55
$0.50
$0.45
$0.40
Source: MEMR, S&P Global Platts Analytics
• Indonesia’s domestic Biodiesel Market Price Index increased to 48.5 cents/liter in
September from 47.6 cents/liter in August, equivalent FOB SE Asia prices in August were
52.7 cents/liter
• In 2019, domestic biodiesel prices were on average 4 cents/liter lower than FOB SE Asia
• On August 29, the Indonesian Coordinating Minister for Economic Affairs announced that
the country may begin implementing B30 as early as October or November
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 7Indonesian ethanol index well above CIF Philippines
US$/liter Ethanol Prices, Indonesia vs. CIF Philippines
$0.90 Indonesia, Ethanol Market Price Index
Platts Ethanol CIF Philippines
$0.80
$0.70
2019
$0.60 CIF Philippines
24 cents cheaper on average
$0.50
$0.40
Source: MEMR, S&P Global Platts Analytics
• Indonesia’s domestic Ethanol Market Price Index fell to 70.6 cents/liter in September from
71.4 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 71
cents/liter in August
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 8FUNDAMENTALS & TRADE FLOWS
Brazil hydrous ethanol consumption hits record high for
a July and surged 16% on the year. Jan-Jul up 30% on
year
billion liters Brazil Hydrous Consumption
2.5
2.0
1.5
1.0
0.5
0.0
Jan Mar May Jul Sept Nov
2017 2018 2019 5-year average Forecast
Source: ANP/S&P Global Platts Analytics
• 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.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 10CS Brazil ethanol stocks much lower on year despite
recent peak of 2019-20 output
CS Brazil Ethanol Stocks by mid-August
billion liters
10
hydrous: -22% y-o-y
9
anhydrous: -15% y-o-y
8
7
6
5
4
3
2
1
0
14/15 15/16 16/17 17/18 18/19 19/20
Source: MAPA Anhydrous Hydrous
• 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.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 11US ethanol stocks briefly rise above 1 billion gallons
despite facilities either shutting down or cutting output
US Ethanol Stocks
million barrels
26
25
24
23
22
21
20
Jul-18 Sep-18 Dec-18 Mar-19 May-19 Aug-19
Source: EIA
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 12US ethanol margins rebound, but low returns still led to
production cuts in August
US Ethanol Production US Ethanol Manufacturing Margins
thousand barrels/day cents/gal
1,120 20
1,100
15
1,080
-7%
10
1,060
1,040 5
1,020
0
1,000
-5
980
960 -10
Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19
Source: EIA Source: S&P Global Platts
• S&P Global Platts Analytics forecasts that US ethanol production will fall in 2019, which would be
the 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.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 13German H1 ethanol demand down 5% on year at 717
million liters on high T2 prices
German Ethanol Consumption
mln liters
450
400
350
300
250
200
150
100
50
0
2016 2017 2018 2019
Source: HM Revenue & Customs
• 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.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 14India ethanol production hits record high in August
mil liters India: Ethanol Production, 2019
3,000
2,500 2.25 billion liters forecast
or 92% lifted against
quantity contracted
2,000
1,500
1,000
500
0
Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Nov-19
Source: ISMA, S&P Global Platts Analytics
(Contracted)
• In August 2019, India’s state-owned oil marketing companies lifted 1.58 billion liters of ethanol, a
record high that surpassed 2017-18’s 1.50 billion liters
• According to the Indian Sugar Mills Association, the average ethanol blending percentage (as of
August) was 5.7%
• Platts Analytics projects a fuel ethanol output of 2.25 billion liters and blending rate of 5.3%
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 15Irish July biodiesel demand up 33% on year to record
high 17,327 mt on low FAME0 prices
Ireland: Biodiesel demand
'000 mt
14
12
10
8
6
4
2
0
2016 2017 2018 2019
Source: NORA
• 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%.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 16California biomass-based diesel use at record high
California Low Carbon Fuel Standard
metric tons Credits generated by Biomass-based diesel
1,400,000
1,200,000
1,000,000 +11%
800,000
600,000
400,000
200,000
-
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
2011Q1
2012Q1
2013Q1
2014Q1
2015Q1
2016Q1
2017Q1
2018Q1
2019Q1
Renewable Diesel Biodiesel
Source: CARB
• Renewable diesel made up 26% of the total volume of clean fuels in California (including
biofuels, renewable natural gas, electricity and hydrogen) and 36% of the total LCFS credits
generated in the first quarter.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 17Argentine biodiesel exports lowest in a July since 2008.
Temporary fuel price liberalization could cut mandatory
blending
Argentina Biodiesel Exports
'000 mt
250
Thousands
200
150
100
50
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Ministry of Energy
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 18China July biodiesel imports rise for fourth consecutive
month
tons '000s China, Biodiesel Imports
300
Indonesia
250 +28% Expected
Malaysia Decline
200
Others +60%
150
- Seasonal
100 (Winter)
- B30 in
50
Indonesia
-
Source: S&P Global Platts Analytics, General Administration of Customs, PRC
• 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’s
B30 initiative
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 19REGULATORY
Brazil ethanol import quota renewed and increased to
750 million liters/year
Brazil NNE: Ethanol Price & Import
Real/cu m Arbitrage
2,900
2,700
2,500
2,300
2,100
1,900
1,700
1,500
Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19
Platts Anhydrous DAP Suape
20% import tariff
Source: S&P Global Platts with quota (tariff free)
• Brazil’s ethanol import tariff free quota increased to 750 million from 600 million liters/year
as of September 1 for 12 months. S&P Global Platts Analytics does not expect an impact on
Brazilian imports until 2020, most probably replacing part of the flow from the CS region
during its intercrop period (January-March).
• Brazil’s North-Northeast region -- where most imports enter -- has a structural deficit of
2.35 billion liters.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 21RIN 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 billion
RINs.
• President Donald Trump has been sharply criticized by the corn and ethanol industries
recently and he promised a “giant package” for ethanol in a tweet dated August 29. The
most likely scenarios include increasing the renewable fuel mandates for 2020 and beyond,
and reallocating waived volumes going forward.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 22Brazil biodiesel mandate rises to B11 as of September;
Output surges to 9-month high in July
Brazil Biodiesel Consumption
´000 mt
10,000
Thousands
8,000
6,000
4,000
2,000
0
2015 2017 2019* 2021* 2023* 2025*
Source: ANP/*S&P Global Platts Analytics Forecast
• 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 push
Brazil's biodiesel consumption to around 10 million cu m a year.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 23EU 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.
3 September, 2019 MONTHLY BIOFUELS PRESENTATION 24If you have questions or comments, please contact us: ethanol@spglobal.com biodiesel@spglobal.com Prepared by: Beatriz Pupo Corey Lavinsky Kathlyn Saillen Loren Puette 3 September, 2019 MONTHLY BIOFUELS PRESENTATION 25
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