The Asian palm oil mill effluent market has strengthened since the start of January, and spot prices were gaining support from a pick-up in demand and flood-related supply concerns in Indonesia and Malaysia, trade sources said.
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Cadastre-se agoraMarket participants said that several suppliers of Indonesia and Malaysia POME have refrained from offering bulk cargoes as they were still assessing the aftermath of heavy monsoon rains on POME output, logistics, and a possible hike in collection rates at the mills.
"Output has dropped last month, and yields have been declining also due to the floods," a trader said. Another trader added that logistical challenges caused by floods have slowed the collection of POME at the mills and delayed deliveries.
In Indonesia, December exports shrank following the drop in output. Indonesia's December palm exports fell 16.73% on the month to 2.09 million mt, data from cargo surveyor ITS showed. Crude palm oil exports declined 60.63% on the month to 182,246 mt, ITS reported.
The FOB Malaysia and Indonesia POME price was assessed at $740/mt at the market close Jan. 18, compared with $705-$710/mt a week ago, data by S&P Global Commodity Insights showed.
Asian spot prices have climbed 4%-5% since Platts first began assessing the Asian POME prices of both FOB Malaysia and FOB Indonesia on Jan. 2.
One market source said collection rates at Indonesia's Belawan port in Sumatra have jumped to nearly $700/mt ex-works this week compared with the low $600s/mt seen at the beginning of January.
On the demand side, buying interest has steadily improved from early-January, traders said.
An Indonesian POME bulk cargo was said to have been sold by a regional producer at $730/mt FOB, a level deemed by a few sources as higher than what most participants had initially expected. The deal prompted speculation that the cargo could be destined for Italy and most likely commanded a higher premium than the standard POME cargo owing to INS (Italian National Scheme) certification.
A flurry of spot trades also occurred this week, with at least two bulk Indonesian POME cargoes reportedly changing hands at the $735-$740/mt FOB levels for March loading. Trade sources said that both cargoes were ISCC-certified and thought to be headed for the EU markets.
POME is considered an advanced feedstock under the EU renewable energy directive and counts double toward biodiesel mandates in Europe, making it increasingly sought after by blenders.