SE Asian Palm Oil Producers Target U.S. Biofuel Market

(The Star/Reuters) A blending tax credit for alternative fuels has helped re-open the way for shipments of palm biodiesel to the United States, giving top producers Indonesia and Malaysia an outlet for palm oil stocks at near-record levels.

...That overhang has pushed prices of palm oil to discounts to soyoil, the main U.S. biodiesel base, while the tax credit reinstated in the world's largest energy consumer made palm biodiesel from Southeast Asia competitive to petroleum diesel.

"The U.S. is a wildcard. In 2012, there was almost zero palm-biodiesel that went into the U.S," said a Southeast Asian palm oil trader who exports palm-based biodiesel, declining to be named as he was not authorised to speak to the media.

"With the subsidies and a huge spread between palm and energy, there will definitely be a lot of palm demand going into energy, as long as the price difference is there," he said, adding that there had already been shipments to the United States from Southeast Asia this year.

The economics are appealing for exporters. Reuters calculations show the United States can import palm methyl ester (PME), or palm-based biodiesel, at around $1,100 per tonne taking into account freight rate and other costs. That is cheaper than U.S. soyoil derived fuel at about $1,200 per tonne.

... U.S. trade and customs data shows there was no biodiesel imported from Indonesia and Malaysia for 2011 and 2012, mainly due to heating oil prices in the United States holding well above palm biodiesel prices in Southeast Asia. READ MORE