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European RME biodiesel passes six-year high on low Rhine levels, market tightness

London — The European RME outright price passed a six-year high Monday as continuing logistical issues stemming from the low water levels along the Rhine tightened their presence in the European biodiesel market.

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The RME outright price rose to $1,331.25/mt FOB ARA, its highest level since October 10, 2012, reflecting a rise of 6.35% week-on-week.

RME's premium to FAME 0 also posted a fresh record high Tuesday at $491/mt, the fifth consecutive all-time high in as many trading days. Indeed over the course of October, this relationship hit new all-time highs eight times, reflecting the unprecedented landscape that the European biodiesel market has found itself in, following these logistical issues.

"RME is really strong at the moment on the prompt owing to the Rhine levels -- it should still continue to rise on the front," said a source Monday, as the bullish sentiment in the market continued on the front.

"The market is now adjusted to these strong premiums so the moves are more conservative on the prompt," said another source, as RME only gained $12/mt on Monday, compared to the $32.25/mt gained Friday, or the $24.50/mt on Thursday.

The low Rhine water levels have been preventing material leaving production facilities, meaning the movement of rapeseed to facilities for crushing and the movement of the finished RME is largely impossible.

The second of these obstacles has been more strongly felt in the market as with many crushing facilities, feedstock is stored locally, but there have been issues moving rapeseed oil to biodiesel plants also.

With the water levels hindering many commodities, alternative methods of moving product such as rail and truck are fully booked and did not appear to be able to offer much help to the situation.

Water levels at the key reference point of Kaub regained some ground Monday, hitting 56 cm at 0300 GMT, though that was still far too low to enable full barge loading, which requires 150 cm, and reflected falling water levels since they rallied to 62 cm Wednesday.

RME values were already strong on seasonal factors, when demand rises into winter owing to its superior cold weather properties, and that was partly responsible for the wider RME-FAME 0 relationship.

--George Griffiths, george.griffiths@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com