Tank Storage Asia preview: outlook on Asian biofuels markets

Tank Storage Asia, taking place on 10 and 11 December 2013 at Singapore Expo, has secured its best ever conference line up. Over 20 leading authorities in the Asian bulk liquid storage sector will deliver sessions on the critical issues spanning the whole region - from the Middle East to China and New Zealand.

On the first day of the Tank Storage Asia conference, Nurul Darni, Asia biofuels editor at Argus Media, will look at growth in the industry and the outlook for Asian trading. She says:

‘Asian countries have started their own biofuels plans/mandates during the past five years to further develop their industries, including ethanol. Biofuels developments in Asia could have an important impact on world energy and agri commodity markets.

It has been estimated by 2030 biofuels will account for around 3 to 14% of the total transport fuel mix in Asia, assuming there is rapid expansion of high-yielding, first-generation biofuels crops on underutilised land, as well as commercialisation and scale-up of cellulosic biofuels production from agri residues.’

Darni believes biodiesel and ethanol in Asia will continue to be priced according to global arbitrage prospects.

‘For ethanol, movement of sugar prices, domestic currencies and crude/petrol prices will be vital in determining trade flows. A current ethanol shortage in Asia could lead to US supplies to the Philippines despite high import tariffs. Philippines will be in a supply deficit at least until 2014.

‘The regional ethanol supply shift has moved away from Thailand, but it could export again as more plants come online from the fourth quarter of this year. Global trading firms and suppliers will switch to the lowest cost point of supply and prices will continue to be driven by the market, not by the price of feedstock,’ she continues.

‘Brazil, the US, Thailand, Vietnam, Indonesia are expected to remain key exporters. US ethanol production has recovered from last year’s drought. In Asia, 10% ethanol-blended 91 Ron petrol is drawing Thai producers’ interest back to meet domestic gasohol demand.

‘Ethanol consumption is expected to increase approximately 10% from the previous year. The ethanol mandates in Philippines are also creating a strong demand market in the region. Apart from these two major drivers in the region, there is also potential demand from India, and continuous demand from northeast Asia, especially from South Korea, Japan and China, for hydrous ethanol in the industrial and beverage sectors.

‘Mandates drive a large chunk of the Asian biofuels industry. The Philippines currently has a mandatory E10 fuel ethanol blending that was implemented in April. Only about 20% of the country's demand is supplied by domestic production, with the rest from imports. Petron and Shell’s Philippine affiliate have been importing ethanol either from southeast Asia, Brazil or the US. Malaysian biodiesel spot trade and exports are expected to increase next year as Indonesian producers focus on the domestic market. Indonesia’s state-owned refiner Pertamina issued a tender to buy biodiesel that will take Indonesian volume off the market.’

Darni thinks it is a fascinating time to be looking at the Asian biodiesel and ethanol markets because it has also moved into the spotlight of the sugar and ethanol industries, as global supplies are looking for new markets.

‘Sugar crop production within the region also continues to improve and new plants come on line in Asia, namely in Thailand. Market transparency appears to be improving and buyers and sellers of imported ethanol are seeking assessments that are more responsive to Asian markets. It is understandable that ethanol producers/oil companies want an effective means of hedging their risks or for price planning,’ she concludes.