RED RME production margins in Northwest Europe remain in negative territory as the premium fell to a one-month low Monday, while feedstock prices in Europe remain strong on low availability.
The differential between outright RME and rapeseed oil prices on the spot market was at Eur73.33/mt Monday and has been below Eur80/mt since November 12. RME producers generally have positive production margins when this differential is above Eur80/mt.
Margins fell recently due to a tumble in underlying energy prices, dragging down RME outright prices and bringing margins closer to break-even.
The RME premium fell to a one-month low of $439/mt Monday, as the underlying ICE gasoil futures recovered and due to a general "weaker ags environment," a source said.
But "the rally in gasoils is not converting into better margins but in better premiums [for buyers]," a source said, as outright RME price remained steady, dipping just $0.75/mt to $872/mt Monday.
Feedstock prices have risen over the past month on a lower German rapeseed harvest this year and oil mills not running "at a 100%," sources said. This is causing tightness in the oil market.
"There are pockets where you don't get the rapeseed oil, just because there isn't enough," a source said.
Rapeseed oil prices remain strong for delivery during December and January and the backwardation in the market is not as steep as the backwardation in the RME market structure, lowering the differential between the two further out.
"Margins in December are the same [as spot] but January is a nightmare," one source said.
Some relief is coming from the Euro edging closer to the US dollar, giving some support to euro-nominated production margins, sources said.
The Euro/US dollar rate was assessed Monday at 1.064 down 48 points on the day.
