Both the RED RME and RED FAME 0 premium hit a two-month low Monday with buyers taking a step back as biodiesel became more expensive compared to falling fossil diesel prices, forcing sellers to hit lower bids, sources said.
The RME premium was assessed at $522/mt, down $11.50/mt on the day and was last lower December 10 when it reached $513.75/mt. The FAME 0 premium fell by the same amount and was last at $432.25/mt.
Outright prices saw an even bigger day on day drop as underlying ICE gasoil futures fell on the day. The February contract lost $5.50/mt Monday and was assessed at $289.75/mt.
Biodiesel demand is currently very low, with the sole demand coming from blenders, which are holding back any purchases of bio-product in Q1 due to the big difference between biodiesel and fossil diesel prices.
The next set of tenders will be published mid-February which will attract more demand, with deliveries starting from Q2 onwards.
However, blenders aim to buy more UCOME volumes at the start of Q2 as the market switches to summer spec.
The used-cooking oil based UCOME holds a Cold Filter Plugging Point between 0 and plus 2 degrees Celsius which is mainly used in the warmer summer months but has the advantage of higher greenhouse gas savings, while it offers double the amount of bio-certificates.
Slow demand combined with the outright RME price close to its eight-month low of $734.50/mt forced RME producers to slow down production.
"We are already slowing down production -- it is quite an immediate change for us," one source said.
Spot production margins have been negative since mid-January as the outright RME price fell, while rapeseed oil prices remained supported on the bullish sentiment in the global oils market.
