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PRIMA California LCFS Index firm after another strong week, improving low-CI import opportunities

PRIMA’s California LCFS index finished Friday with a weekly gain of $3 as mid-market values climbed to $79.50. Offer indications stepped back to the low-to-mid-$80s/t as buyers held off in the upper-$70s. Trades this week have been seen at $79 for Q3 2016 transfer and at $80 and $81 for Q4 2015 dates. Index prices this week have averaged $79.60, up $4.50 WoW, leaving October’s month to date average sitting at $78.50. Offer indications on Friday stepped back to between $81 and $85 as bids sat between $75 and $78.

In August, imports of biodiesel to California jumped 62.48% MoM. Argentina was the main origin, accounting for 48.76% of the total 103.87mn gal of imports. August was the first month since January 2014 that Argentinian biodiesel shipped to CA ports. Besides Argentina, Canada also contributed 22.3% of Californian imports while South Korea contributed another 28.9%. In state, another three plants with a combined capacity of 36 mn gal/yr are under construction. Of this, 6 mn gal will be built to accommodate used cooking oil as the primary feedstock.

High LCFS prices are disproportionately beneficial to low-CI fuels such as biodiesel, increasing their price premiums relative to higher-CI fuels and hiking their arbitrage economics into California. Argentinian biodiesel economics are already starting to look healthier into the US after several weeks in which the spread has been too tight to trade on its own merits. A further step change in Argentinian biodiesel’s northwards tradeability potentially looms if expectations of looser currency controls and reduced export taxes are made reality following October 25th’s Argentinian presidential election. Wide spreads between the official peso/dollar rate and the black market rate give an idea of the room open for Argentinian biodiesel devaluation in dollar terms if domestic peso-denominated input prices suddenly slump against US rivals’ cost base.

PRIMA Daily LCFS Report 09102015


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