News
01/11/24
October a record month for AOM Ucome trading
October a record month for AOM Ucome trading
London, 1 November (Argus) — Used cooking oil methyl ester (Ucome) had its
strongest month yet on the Argus Open Markets (AOM) deal initiation platform in
October, with 107,000t changing hands. Ucome activity more than quadrupled on
the month after only 26,000t traded in September. Ucome traded in October made
up 19.6pc of total Ucome volumes traded in 2024 so far. For all three products
combined — RME, Ucome, and Fame 0 — October 2024 was the most active month of
trading since August 2023, and before that, July 2022. RME trade totalled
145,000t, a 150pc increase from September, and 104,000t of Fame 0 changed hands,
a 108pc increase. In total, 356,000t of biodiesel was traded in October, up from
134,000t in September and 143,000t in August. The rise in activity aligned with
the start of the new quarter and some major news for the market. At the end of
September, Germany proposed a draft bill that would prevent excess greenhouse
gas (GHG) quota tickets from being carried into 2025 and 2026. GHG quota tickets
are the compliance mechanism for the GHG reduction mandate that governs biofuels
usage, and the market is heavily oversupplied at the moment, pressuring down
prices and encouraging companies to buy and use tickets rather than physical
biofuels. By starting from scratch for 2025, participants except demand to pick
up substantially, although until the end of 2024 tickets will remain the cheaper
option. The immediate response to the announcement of the draft bill in Germany
was a surge of activity in the related paper markets for the fourth quarter, a
final piece encouraging physical trading. As of the last day of the October
contract, open interest stood at 1,742 lots for Ucome, 1,167 lots for Fame 0,
and 2,472 lots for RME. Total open interest for the fourth quarter was 4,655
lots for Ucome, 4,396 lots for Fame 0, and 7,529 lots for RME, according to Ice
data. Many companies with strong paper positions will manage exposure by trading
some portion of the total volume in the spot market. The Dutch government
confirmed that the country's ticket carry-over levels will be reduced, which
should also increase biofuels demand next year. Biofuels mandates throughout
Europe go up at the start of the new year, along with the introduction of ReFuel
mandates for aviation and shipping. This all combines for a much more positive
outlook for 2025 demand than the market expected, as well as stronger
competition for supply. The increase in trading started a quarter ahead, as
companies look to take advantage of the changes, prepare for 2025, and still
cover any shorts until the end of this year. European producers have been
struggling with low production margins, which has slowed down production levels.
European supply has tightened because of this and imports are down because of
provisional anti-dumping duties on China, which may have also encouraged some
companies into the window to find product. In the macroeconomic environment,
volatility in energy markets following increased tensions in the Middle East
also prompted some trading, as the Ice gasoil contract underpins European
biodiesel prices and has closely followed military developments. Some
participants reported an overall higher risk appetite for the fourth quarter
after several months of very subdued market activity. By Simone Burgin Monthly
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