Last Friday the WTO finally admitted that the European commission had discriminatded in a protectionistic fashion against Palm oil in its regulatory policies.
How this will be corrected is still uncertain, but surely Indonesia will file for some compensation. The daily settlement for Bean oil/Palm oil futures spread has now returned to a historical relationship on futures of at least $100/mt premium. This move is mostly related to a $118/mt rise in Bean oil value since the end of 2024 on account of 45z excitement and a strong Q4 finish for Bio/RD production in the US. The weekly chart still shows the unusual volatility of this relationship for the last two years since Indonesia pushed a mandate for the use of Palm as a biofuel (B35) in order to support palm prices. The EU commission essentially has banned Palm oil for Biofuels use, just like the US has done since 2012 when it established that Palm oil did not meet the 20% GHG savings threshold at the time because of ILUC - yes, I said 20%. This is, of course, incongruent with generally accepted LCA findings, including in the EU, that GHG savings of palm oil can achieve at least 70% GHG savings, including methane capture. Does this mean that Palm Oil will return as a biofuel in Europe? Very doubtful but clearly possible. In the cash market in ARAG, Bean oil is only $57/mt above Palm Olein while still maintaining its label as the cheapest soft oil in Europe, with Rapeseed oil being +$28/mt premium and Sunflower oil is +$138/mt premium. F0 did not trade today in the spot market but was assessed at $28/mt discount to RME at $1206 flat price. UCOME traded higher in Europe to $1426/mt FP despite not seeing much weakness in the UCO market as US traders are still reconsidering their forward China purchases in view of 45z uncertainties. However, there is a possibility that without 45z and GREET scrutiny that essentially Chinese UCO would still be eligible for D4 RINs & LCFS, and therefore now all hope is being transferred to the RINs market to compensate for lack of 45z. D4 RINs closed on Friday just below 0.73 $/gal. Why not $1 RINs? Europe may not get all that Chinese UCO after all!
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