Viewpoint: Asia bio-bunkers to gain from EU regulations

Spanish Market: Biofuels, Oil products
16/12/24

New regulations in Europe should support Asian demand for marine biodiesel in 2025.

The scope of emissions covered under the EU's Emissions Trading System (ETS) will rise to 70pc next year from 40pc this year, and this will be accompanied by the introduction of the FuelEU Maritime regulations at the turn of the year.

FuelEU Maritime requires a reduction of greenhouse gas (GHG) intensity of fuels by 2pc in 2025 and up to 80pc by 2050, against a 2020 baseline level of 91.16 grammes of CO2 equivalent (gCO2e) per MJ.

These upcoming regulatory changes in Europe should support buying interest for marine biodiesel blends because biofuels compliant with the EU's Renewable Energy Directive (RED) will have a zero CO2 emissions factor under the ETS next year. And waste-based biodiesel produced from feedstocks such as used cooking oil (UCO), which typically provide higher GHG emissions against fossil comparators under RED than crop-based biofuels, will be a viable alternative for many shipowners looking to reduce the GHG intensity of their conventional vessels.

The regulations will not only support demand for marine biodiesel in Europe. They encompasses various flexibility mechanisms, aimed at supporting shipowners in meeting the required reductions, including a system that allows two or more vessels to create a pool in which compliance can be achieved across all vessels within the group as long as the total overall compliance balance of the pool is positive.

Vessels operating between Asia and Europe will have half of energy consumed on those voyages subject to FuelEU Maritme regulations. The energy consumed from a marine biodiesel blend bunkered in Singapore, for example, could be mass balanced to be fully accounted for under this scope. Shipowners with vessels operating on the east-west route could therefore look to bunker marine biodiesel in Singapore or other parts of Asia, and then pool that vessel along with other vessels in their fleet that operate solely within Europe to achieve compliance using a non-European bunkered product.

This dynamic will be supported by anti-dumping duties (ADD) imposed on Chinese biodiesel imports into Europe. The European Commission announced earlier this year provisional ADD measures on China-origin biodiesel and hydrotreated vegetable oil (HVO), with definitive measures set for mid-February 2025. In anticipation of the provisional duties, exports of Chinese biodiesel to the EU fell by over 50pc to 563,440t in the first half of this year compared with the same period of 2023.

At the same time, exports of Chinese biodiesel to Singapore hit a monthly high of 16,500t in August, which was mainly attributed to marine biodiesel blends being bunkered at the port. This pushed Argus price assessments of B24 dob Singapore, a blend comprising used cooking oil methyl ester (Ucome) and very low sulphur fuel oil (VLSFO), to an average discount of about $90/t against B30 Ucome dob ARA in August-October.

The more competitive pricing led to a shift in voluntary demand for marine biodiesel blends away from the Amsterdam-Rotterdam-Antwerp (ARA) hub in northwest Europe and towards Singapore. Marine biodiesel blend sales in Singapore hit a monthly high of 116,200t in October, according to data from the local maritime and port authority.

The option to bunker marine biodiesel blends in Asia to meet European regulations will not be limited to Singapore. China's Zhoushan Port Authority said it will obtain a domestic blend permit by the end of this year, which will pave the way for suppliers to provide marine biodiesel blends to local and international shipowners.

By Hussein Al-Khalisy

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16/12/24

Viewpoint: Policy changes support European biodiesel

London, 16 December (Argus) — European biodiesel participants are looking at a changed market in 2025 as new trade barriers, increasing mandates and a reset of the German greenhouse gas (GHG) savings quota support expectations of improved margins after a sustained squeeze. But continued uncertainty over what a second Donald Trump US presidency will mean for global biofuels markets has stymied some participants and could reshape trade flows again. Just like the old days? Recent policy changes affecting European biofuels are seemingly intended to return the biodiesel market to the period before the rapid increase in imports from China in early 2023, which weighed on prices. But the 2025 market also faces higher mandates and probably higher feedstock costs. In August, the EU imposed provisional anti-dumping duties on imports of biodiesel and hydrotreated vegetable oil (HVO) from China, and definitive anti-dumping duties of 11.1-36.6pc are due to come into force by February. The UK is currently conducting its own anti-dumping investigation into the same products from China, with a provisional recommendation expected by March and final recommendation in August. The duties have significantly slowed imports from China, with Chinese customs data showing biodiesel exports to the EU in August to October at 98,822t, down by 73pc from the same period in 2023. Low demand and high starting stocks continued to weigh on European prices for several months before supply levels tightened because of the drop in imports. Support for some European producers has not completely materialised, with high crop feedstock prices continuing to pressure production margins. European biodiesel supply levels have been further pressured by crop-based producers being unable to secure positive margins in the spot and forward markets, and cutting production, which may persist in 2025. China recently announced the cancellation of its UCO export tax rebate from 1 December, which could raise waste feedstock costs by 13pc from the major exporter. Indonesia also imposed export restrictions on palm oil mill effluent (Pome) oil, supporting advanced feedstock prices. The German cabinet approved a law in November removing the option for companies to carry over excess GHG quota certificates into 2025 and 2026, starting the market from scratch in 2025. In 2023, obligated companies exceeded their quota requirements by around 8mn t of CO2 equivalent, suppressing physical biofuel demand throughout 2024 as tickets were the cheaper option. With the change, Germany is expected to return to an Advanced Fame-focused market. Once the advanced fuel sub-mandate of 0.7pc by energy content has been met, advanced biofuels used towards the GHG quota can be double counted without a cap. When anti-dumping duties were announced, participants expected Chinese advanced producers to switch to feedstock pre-treatment and export to advanced biodiesel producers in Europe or Latin America. But the anticipated ramp-up in production outside China has not materialised, and now it seems that strong German demand may support the arbitrage from China reopening despite the duties imposed. The US outlook Across the Atlantic, a lack of clarity about Trump policies has stalled the market. Most uncertainty hinges on two points — the planned transition from the blender's tax credit to the Inflation Reduction Act's 45Z producer tax credit and Trump's plans to impose import tariffs on various countries . The blender's tax credit is due to expire at the end of this year and be replaced by a production tax credit based on carbon intensity, although official guidance has not yet been published. Exports of finished biofuels to the US would no longer receive the same tax benefit as domestic production, and flows could switch to primarily feedstocks, cutting off one option for European producers to recover thin domestic margins during low demand periods. It is also not clear if Trump will support 45Z or if the blender's tax credit will be extended following industry pressure. If Trump imposes tariffs on Chinese UCO imports, the door could open for European feedstocks and US biofuels could become more expensive. Currently, the UK imports large volumes of HVO from the US at a discount to European HVO to meet mandates — if that arbitrage closes, the UK would probably return to being a Ucome-focused market. By Simone Burgin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Libya declares force majeure at Zawiya refinery

15/12/24

Libya declares force majeure at Zawiya refinery

London, 15 December (Argus) — Libya's state-owned NOC declared force majeure at its 120,000 b/d Zawiya refinery today following clashes between armed groups near the facility. NOC said a number of storage tanks were hit, causing fires. These were subsequently brought under control, it added. Zawiya is Libya's largest operational refinery, with most of its production absorbed domestically. It runs on crude from Libya's Repsol-led El Sharara oil field. The rest of the field's crude is exported as the Esharara grade from a nearby loading terminal which forms part of the wider Zawiya complex. Any prolonged fighting and wider damage to the Zawiya complex could threaten production at El Sharara, particularly if exports are forced to stop. Zawiya exported 160,000 b/d of Esharara crude last month, according to Kpler, and is scheduled to load eight cargoes also worth about 160,000 b/d in December. Political instability has led to several forced shutdowns of oil production facilities over the past decade or so. El Sharara only just returned to production in early October following a forced outage which also affected other fields throughout the country. Libya produced 1.24mn b/d of crude in November, Argus estimates. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US river lock closures may delay product deliveries

13/12/24

US river lock closures may delay product deliveries

Houston, 13 December (Argus) — Mid-Mississippi River and Illinois River locks are expected to undergo long-term closures starting next month, slowing down some commodity deliveries. Three locks around the St Louis, Missouri, and Granite City, Illinois, region will be closed for repairs for up to three months starting 1 January, according to the US Army Corps of Engineers. The Mel Price Main Lock, where the Illinois River flows into the Mississippi River, and Lock 27's main lock, where the Missouri flows into the Mississippi, will also be closed from 1 January through 1 April. The Mel Price Main Lock will commence the final phase of replacement for its upstream lift-gate. Replacement of embedded metals will occur during the closure for Lock 27's main lock. Lock 25 will have a shorter closure date for a sill beam and guide-wall concrete installment from 1 January through 2 March. This is the first lock on the upper Mississippi River, after the Illinois River. These closures are expected to be more of a nuisance than a deterrent for commodity traffic, according to barge carriers. Ice in the river is likely to have melted by mid-March, which may cause barge carriers to wait in the St Louis harbor for the locks to open. Two other lengthy closures are anticipated on the Illinois River beginning on 28 January. The Lockport Lock — the second to last lock on the Illinois River — will be fully closed from 28 January through 25 March for full repairs to the sill and seal of the lock. The prior lock, Brandon Road Lock, will be closed during weekdays over the same time period, but traffic can pass through over the weekend. The lock closures and repairs are expected to delay some barge shipments, specifically to the Great Lakes and Burns Harbor. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Syria faces fuel supply conundrum

13/12/24

Syria faces fuel supply conundrum

London, 13 December (Argus) — The overthrow of Syrian president Bashar al-Assad has left the country's trading relationship with Iran on an uncertain footing, putting pressure on the new transitional government to upgrade refining infrastructure and find alternative sources of fuel supply. As the Assad regime's closest ally, Iran has been Syria's main source of both crude and oil product imports since western sanctions were imposed on Damascas in the early stages of its civil war in 2011. The product shipments are difficult to track as they are carried out by Iran's 'dark fleet', but consultancy FGE estimates Iran has been sending around 10,000-20,000 b/d to Syria in recent years. Those trade flows are no longer guaranteed, given that Hayat Tahir al-Sham (HTS), the main militant group behind the armed revolt to topple Assad, has close ties to Iran's regional rival Turkey. Syria is now likely to import oil products from other local sources, a trading analyst told Argus . Turkey itself is an option, although one Turkish trader ruled out any immediate business plans to supply Syria. Watad, HTS' affiliated oil trading arm, has previously imported oil and gas from Turkey and has marketed gasoline thought to have come from Ukraine via Turkey, according to a regional analyst. Egypt is another possible supplier. It has enough capacity to export refined products to Syria for the time being, according to a refining source in the country. Vortexa data show gasoil was last loaded from Egypt's Sidi Kerir terminal in July. Syria's transitional government may also attempt to increase domestic supply, although that will require rehabilitating the country's 140,000 b/d Banias and 110,000 b/d Homs refineries. Run rates have halved since 2011, the IEA estimates. Only the Banias refinery is operating at a reasonable level, according to sources. Iran earlier this year proposed a €140mn revamp of the Homs refinery, which has been operating below capacity for years because of infrastructure damage incurred during the civil war . Syrian demand for oil products has seen a structural decline since the civil war, with consumption dropping by around 60pc between 2011 and 2022, according to the IEA. But with Assad's overthrow signalling a potential return of refugees from neighbouring Turkey, Lebanon and Jordan, demand may pick up in the coming months, intensifying pressure on the transitional administration to seek new trade flows and repair the country's refining infrastructure. By George Maher-Bonnett Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Tarmac to receive bitumen at UK Dagenham terminal

13/12/24

Tarmac to receive bitumen at UK Dagenham terminal

London, 13 December (Argus) — Tarmac, one of the UK's leading road and general construction firms, will start receiving bitumen cargoes at the 20,000t capacity Dagenham bitumen terminal in southeast England in late January, market participants told Argus . The terminal, operated by trading firm Trafigura's Puma Energy unit since 2015 , is part of an oil storage facility run by Stolthaven Terminals, a subsidiary of Norwegian company Stolt-Nielsen. Puma Energy regularly imports bitumen cargoes into Dagenham from a variety of sources including its own Cadiz bitumen terminal in Spain. Some 211,000t has been imported into Dagenham this year, roughly double 2023 volumes, according to data from trade analytics firm Vortexa. The sharp rise follows Puma Energy's decision to halt operations at its bitumen barge terminal in Newport, Wales early this year. Market participants said at the time that they expected Puma Energy to increase imports into Dagenham for inward truck supply to domestic UK customers to help compensate for the Newport halt. Trafigura and Tarmac have declined to comment on the latter's bitumen purchase plans at Dagenham. It is not clear whether Trafigura will exclusively supply the volumes into the terminal for Tarmac. The constructor is understood to have struck its annual term deals for all its UK bitumen purchases for 2025, but the identity of the suppliers has not been disclosed. by Fenella Rhodes and Keyvan Hedvat Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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