Two Weeks in Review [Oct 2024]

By Claudia Nyon, research@segi-enam.com

Our researchers have been tracking Southeast Asian commodities and “green” supply chains for over 15 years, and have worked in the financial sector.  There is a great deal of interest in palm oil, as its supply is heavily dominated by Indonesia and Malaysia, the two core producing countries. We are also keeping a close eye on smallholders and on Thailand as the low-carbon export capability from these segments is fascinating. Our principal, Yu Leng, keeps in good contact with industry networks in the region (including in Singapore, Kuala Lumpur, Jakarta and Bangkok) and with trade partners across the globe.

Here is a summary of some key reporting for PalmTrack Subscribers, starting with the most recent posts.

• Vessel updates are catching up. Port watch is targeted for the second week of each month, rainfall in the third week and vessel watch in the last week (and our breaks are in July-Aug and Dec).

• The #PalmTrack Weather Update on 24 October 2024 highlights significant rainfall patterns and climate conditions affecting palm oil regions in Southeast Asia:

  • Mid-Sep to Mid-Oct: Kalimantan and northern Sumatra experienced over 300 mm of rain. A potential La Niña is on the horizon. Sabah (Malaysia) areas like Kudat and Sandakan are warned of 500-600 mm monthly rainfall for December and January.

  • 30 Days to Mid-October: Intense rainfall across northern Johor to Selangor (Malaysia) and much of Sarawak, receiving up to 400 mm. Sumatra (Indonesia) faced even heavier rainfall, with some regions getting up to 700 mm. Lampung was notably drier with less than 100 mm.

  • Australia's BOM Outlook is for ENSO (El Niño-Southern Oscillation) and IOD (Indian Ocean Dipole) are neutral, but La Niña is being watched, expected to be weak and short-lived. Meanwhile, from ASMC we note that dry conditions have caused hotspots in Central and South Kalimantan, as well as parts of Sumatra.

• The #PalmTrack Analysis & Expert View, 22 October 2024, highlights challenges and developments in the biodiesel and sustainable aviation fuel (SAF) sectors:

  • Regional Biodiesel Challenges: Biodiesel in Southeast Asia is facing difficulties. Thailand and the Philippines have lowered mandates, while Malaysia struggles despite promoting palm oil. India is exploring a B6 biodiesel blend, and China’s surging used cooking oil (UCO) supply is causing angst. ASEAN lacks biodiesel trade and needs insufficient government cooperation and targeted subsidies.

  • SAF and HVO Oversupply: A major renewable diesel (RD) and SAF player shut down a plant for Q4 due to an oversupply of SAF and hydrotreated vegetable oil (HVO), with storage maxed out. The U.S. market faces challenges in 2025 with changes in tax credits and eligibility.

  • Singapore’s Biodiesel Landscape: Singapore lacks a formal biodiesel policy, and although it’s available at some pumps there remains no mandate. Alpha UCO and Neste RD operate there, though they don’t produce biodiesel. Singapore Airlines recently purchased 1,000 tonnes of SAF, but Neste produces 6,000 tonnes daily.

• The #PalmTrack Analysis & Expert View, 14 October 2024, highlights a decline in Malaysia's palm oil consumption due to biodiesel challenges under the country’s move to curtail massive diesel leakages:

  • Palm Oil Consumption Drop: Malaysia's palm oil consumption has dropped, particularly in Peninsular Malaysia, with a 30% decrease (as predicted). Experts confirmed this is linked to reforms curbing large-scale diesel subsidy leakage in the Peninsula.

  • Biodiesel Reduction Due to Diesel Reforms: Diesel reforms in Malaysia could reduce palm biodiesel usage by 15-30%, affecting large-scale flows to Thailand. While subsidies remain for fleet owners, high-income earners will be phased out. Further reforms targeting fishermen could hit biodiesel usage even more.

• From May to August 2024, #PalmTrack interviewed experts on their ASEAN biodiesel outlook, in our 11 October 2024 report:

  • Key topics include Indonesia's potential B50 mandate, the Philippines' 3% CME push, and Malaysia's diesel subsidy reforms affecting palm FAME.

  • The biodiesel industry faces challenges like EU/US restrictions, limited regional collaboration, feedstock access issues, and competition from sustainable aviation fuel (SAF). Upcoming regulations, such as Indonesia’s palm oil export limits and PFAD phase-out, could further add pressure to the market.

The Trouble with Tallow (and Renewable Diesel?): Singapore & Globally

By Khor Yu Leng, yuleng@segi-enam.com & Claudia Nyon research@segi-enam.com 

Industry players have been agog at news from Argus reporting a pile up of tallow vessels outside Singapore shortly after production stoppage at Neste’s Singapore biorefinery slowed down purchases of tallow feedstock. Equipment failure around mid-October at the refinery put the production of renewable diesel to a standstill, as covered by us here. 

Three vessels have been pinpointed as carrying tallow and facing trouble offloading the commodity in Singapore: Stolt Renge, Stolt Sakura and Stolt Satsuki.  

We’ve tracked these vessels and our findings confirm this.

The Stolt Renge, which has a carrying capacity of 12,343 tonnes sailing under the flag of Singapore, has a current load condition of being in ballast (i.e., not carrying any cargo but containers filled with sea water to add weight). It departed from Port Klang and arrived in Singapore on 6 November, 9.15 a.m. Since late October, the Stolt Renge seems to have been shuttlingbetween Port Klang and Singapore. In early October, the Stolt Renge stationed itself in Singapore for 21 days. 

Another such ship similarly found itself stationed in Singapore for long periods of time in early October: the Stolt Sakura was stationed for 23 days before heading to Port Klang where it moved between the different anchorages within Port Klang for the next 12 days. As last checked, the Stolt Sakura is now stationed in Kuantan with a load condition of being in ballast. It has a carrying capacity of 12,817 tonnes sailing under the flag of Singapore.

Unlike the earlier ships, the Stolt Satsuki has found herself stationed in Singapore since 21 October since its arrival from Brisbane. It has a load condition of being laden with a carrying capacity of 12,342 tonnes sailing under the flag of Singapore.

The collective dates indicating inactivity in Singapore since early October coincides with reports in early October that Neste’s Singapore diesel line was taken offline after equipment failure following scheduled maintenance work. In early November, Neste reportedly also temporarily shut down its refinery in Rotterdam, Netherlands, following a fire. Neste subsequently lowered its full-year guidance for renewable products sales volumes. These delays reflect a broader supply chain issues.

Demand-side, soaring US biofuel demand is reshaping trade flows. In early November (as reported prior to the US election) significantly changed global trade flows of tallow in the past two years, boosting world trade to a new high of 2.5 Mn T in Oct/Sept 2023/24 (+24%). 

The story on tallow, as one of several diesel feedstocks, is just one facet of the broader narrative surrounding renewable diesel’s future. In the first four months of 2024, imported Brazilian tallow in the US for biofuel production surged by 377% compared to previous years, edging out US soybean farmers. From Jan to Sept 2024, reports came in that the US flooded its market with a record 3.9 billion pounds of imported UCO, up 98% year-on-year, 55% of which originated from China. 

Some experts suggest the volume of UCO imported by the US in 2024 was enough to replace the oil from more than 332 million bushels of soybeans (equivalent to Minnesota’s entire 2024 crop).Others counter that the demand for soy oil has consistently increased since food use has remained steady  since the mid-2000s after the FDA set rules on trans fat use in foods. They argue that imports are necessary to meet domestic demands for biomass-based diesel, be it feedstocks or finished products. 

Renewable diesel made from tallow and UCO has a lower carbon score than soybean oil and hence was eligible for higher tax credits in California, where a high proportion of US green diesel is consumed. 

However, with president-elect Donald Trump’s unannounced tariff plans, it remains possible that a blanket import tariff could close the door on imported (and cheaper) renewable diesel supplies. 

Coupled with Neste’s refinery disruptions, perhaps renewable biofuels in general are at risk? The Trump administration’s pick for the EPA administrator, Lee Zeldin, has already resulted in the biggest slump in soybean oil  since July 2024, as noticed by experts a few days ago. Experts typically zoom in on soybean oil as it tends to react first to any headlines related to the RFS. Historically, Lee Zeldin has consistently voted against the Renewable Fuel Standard (RFS) and soybean oil has been one of the main feedstocks used in biofuel production.