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European RME biodiesel hits all-time high at $1,422/mt on low Rhine levels, tight supply

London — The European RME price hit an all-time high Friday of $1,422/mt FOB ARA, up $102.75 week on week, as continuing logistical issues stemming from the low water levels along the Rhine plagued the European biodiesel market once again.

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RME's premium over front-month ICE gasoil futures also hit an all-time high Friday at $765.25/mt FOB ARA, up $119.25 week on week. This comes alongside waning gasoil futures which fell $9 over the same period to $670/mt, but the high price has highlighted the bullish sentiment in the RME market.

Low water levels on the Rhine 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 too.

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 have continued to fall over the course of the week, hitting 36 centimeters at 0300 GMT Friday, still significantly lower than the 150 cm needed to enable full barge loading.

RME was already supported by seasonal factors as demand rises into winter owing to its superior cold properties. This was partly responsible for RME's wider premium to FAME 0, which also hit its highest ever of $616.50/mt, up $143.25 on the week.

Following significant imports of soy-derived biodiesel from Argentina, tanks in ARA are largely full, but without the RME for blending, this blendstock is idling on the prompt, waiting for logistical issues to ease

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The FAME 0 market has, by contrast, remained well supplied with falling temperatures making blending harder, despite large-scale imports of soy-based biodiesel into Europe from South America. "Tanks are still stuffed with SME and it is far too cold for PME [palm-derived biodiesel] blending now."

With SME continuing to flow into Europe, and 40,000 mt already booked for first-half November loading alone, it appears that the situation in ARA for blendstock will continue to lengthen, and logistical issues will continue to plague the market in the form of full storage and a lack of RME with which to blend these imports arriving into ARA.

Despite these large volumes of SME imports, PME imports from Southeast Asia have fallen significantly. "The import window from SE Asia is not open, nobody is booking any PME at the moment -- Indonesia is using it all domestically, and the Malaysians are only moving product to China," a source said.

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

--Edited by Jonathan Dart, newsdesk@spglobal.com