Market players commented that the biodiesel industry, which has been sidelined for a considerable period owing to poor margins for the creation of rapeseed methyl ester (RME) from rapeseed oil, has “come back to life”
This is since renewable energy certificates (created when companies produce renewable energy) were oversupplied with some products counting double, and are now being curbed with cuts to carryover rules which has allowed some players to avoid producing mandated volumes, sources said.
Industry insiders said the anti-dumping investigation which was launched on Chinese biodiesel volumes in 2024 had also begun to take effect, with increases in prices for support for RME prices. Sources familiar with the situation said that the uptick in physical prices caused an increase in the margin, which is now sitting just below full cost at $110/mt-$112/mt or nearby.
If these factors remain in play, the level of participation of the biodiesel industry could increase, potentially drawing down volumes of rapeseed oil, traders commented. The level of drawdown could be significant since the biodiesel industry typically accounts for the main usage of rapeseed oil, potentially adding upward price pressure, market players said.
Turning to supply, market players continue to raise concerns about rapeseed production in key EU growing regions such as Poland, France and Germany, due to ongoing dryness and low soil moisture levels. Industry insiders noted that rapeseed, which had remained in fair condition in previous weeks, is now experiencing severe drought stress; a critical concern as the crop is in its critical flowering stage, just before harvest.
A trader said, “the 19 million mt estimates for the EU-27 are dead and gone. The crop is likely to be closer to 18 million mt than 19 million mt”.
It is worth noting that this view is widely shared by most players consulted by Expana, with production estimates ranging from 18 to 18.4 million metric tons. If these estimates are realized, they are still an increase of 1.2 million to 1.6 million compared to the 2024/25 season. However, market players emphasized that the key issue is that the market is alleged to be still trading at the 19 million mt production number.
Once the ‘news’ of lower production filters through to the market, it may cause “a flurry of activity in the rapeseed complex, and probably move prices higher,” a source said. Supporting this view, Expana continues to hear that coverage of rapeseed oil beyond mid-year remains exceedingly weak, with some sources suggesting that players may soon be ‘forced’ to consign.
Furthermore, Ukraine may be about to place an export duty of 10% on rapeseed and soy, allegedly because the Ukrainian government wants to ensure more oilseed processing within Ukraine rather than exports of raw rapeseed and soy, market players said. The view is supported by the fact that Ukraine commonly exports in excess of 6.5 million mt of raw soy and rapeseed compared to around 700,000 mt of oil, according to USDA export figures.
Market players additionally commented that the idea of limiting exports is supported by UkrOliyaProm, a key industry body representing the oilseeds oils and crush sectors within Ukraine. Industry insiders said that UkrOliyaProm suggested banning exports of soybean and rapeseed entirely or only allowing circa 50% of production to be exported, forcing the other 50% to be processed domestically.
Market players said the situation was likely to be a critical watchout factor since an export duty alone could significantly alter trade flows of the product potentially ‘forcing’ the EU who imports vast quantities of Ukrainian rapeseed to seek alternative suppliers or instead purchase rapeseed oil from Ukraine which now is a rare event.
Industry insiders commented that the ‘forced’ crushing of rape and soy in Ukraine could see the market become like sunflower where Ukraine is a key producer but crushes around 90% of the crop domestically ensuring the “a value add to the supply chain” a trader commented.
Image source: Shutterstock
Written by Kyle Holland
