Physical trading of northwest European benchmark biodiesel grade Fame 0°C CFPP (Fame 0) hit a record high in April, supported by spot price declines during Covid-19 lockdowns in the EU and following record volumes of futures trading for the grade in March.
The crash in European diesel demand caused by the Covid-19 pandemic resulted in many participants in the European biodiesel market turning to Fame 0 futures to manage risk exposure, taking on new positions and adjusting those set out before the lockdowns.
A record 18,245 lots of 100t Fame 0 contracts changed hands at a premium to low sulphur gasoil futures on the Intercontinental Exchange (ICE) in March, up from just 6,170 in February and eclipsing the previous all-time high of 12,680 lots in November 2019.
With prices hitting lows at the end of March not recorded since Argus began assessing the grade in 2011, physical liquidity then picked up significantly, with much of the product bought in April probably going into storage — as suggested by inquires for floating storage in the Amsterdam-Rotterdam-Antwerp (ARA) region — before expected price gains connected with the easing of lockdown measures.
An all-time high 180,000t of physical Fame 0 traded for prompt loading in April, with a daily record of 25,000t changing hands on 24 April. This represented an increase of 131pc from traded volumes in March and a rise of 49pc on the year.
Domestically produced rapeseed oil methyl ester (RME) — another northwest European biodiesel benchmark — slipped below fob Dutch mill rapeseed oil (RSO) prompt prices for the first time in March. Accordingly, in April major RME plants in the region began to run at reduced capacity or shut down altogether, also driving a rise in associated futures trading.
Traded volumes of RME futures in March increased by 6,282 lots on the month to 8,582 lots of 100t, before rising again to a nine-month high in April of 9,430 lots. Spot liquidity for RME has been more measured given the seasonal norms associated with its cold-weather properties. Physical trade totalled 46,000t in April, up by 53pc from volumes in March but lower by the same percentage when compared with April 2019, with an unseasonably high level of trade that month owed to firm prices in the first quarter of the year.
Demand for physical biodiesel has been broadly supported by efforts of EU members to ramp up their use of renewable fuels to meet a 10pc target in transport this year under the Renewable Energy Directive (RED).
In January-April 2020, spot trading of RME and Fame 0 combined totalled 621,000t, a large increase from the 444,000t recorded over the four-month period last year.
