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Optimising Biofuels and Feedstock Risk Management

Optimising Biofuels and Feedstock Risk Management. Joachim Emanuelsson, COO SCB. Today’s Topics. Market Factors affecting the Biofuel “paper” markets Managing Risk Across the Biofuel Supply Chain Physical and Derivative price differences. Market Factors affecting the Biofuel “paper” markets.

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Optimising Biofuels and Feedstock Risk Management

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  1. Optimising Biofuels and Feedstock Risk Management Joachim Emanuelsson, COO SCB

  2. Today’s Topics Market Factors affecting the Biofuel “paper” markets Managing Risk Across the Biofuel Supply Chain Physical and Derivative price differences

  3. Market Factors affecting the Biofuel “paper” markets • Related markets, Agricultural and Soft commodity markets and their movements plays more and more of a role • Changes in Foreign Exchange $/€ and $/myr • Gasoil price moves • Transportation and Logistical issues • Global growth and super cycles

  4. Market Factors Regulations Commodity Super Trends Vegetable Oil Ags/Soft Gasoil Price Bio-Fuels Physical Supply & Demand Global Growth Food vs. Fuel Blend Economics $/€

  5. Corn and FAME 0

  6. Sugar and FAME 0

  7. Wheat and FAME 0

  8. Super Cycles

  9. Managing Risk Across the Bio-Fuels Chain • Managing risk across the bio fuel chain is crucial, gone are days of flat price trading • Correlation hedges • Instruments; Swaps, Options and Futures • Clearing and counterpart risk control

  10. Bio-Fuel Supply Chain FAME +5 FAME 0 FAME -5 FAME -10 FAME -15 RME Ethanol T1 Ethanol T2 CPO PME Soy Beans Bean Oil SME Rapeseed RSO RME Sugar/Corn/Wheat Ethanol Hedges Available

  11. Signs of a Good Hedge • Basis for a good hedge • Liquid markets • Data availability • Price discovery is easy • Access to clearing or credit lines • High correlation

  12. Good Correlation

  13. Poor correlation

  14. RME Swaps vs. Physical RME Proportional Change Correlation: 0.8746

  15. CPO Swaps

  16. Physical and paper price differences • We have seen paper trade at a significant discount to physical • Inherent cost handling physical, financing, transport etc. • Gasoil is averaging -12 USD/MT • FAME 0 is averaging -9.40 USD/MT • More Liquidity and counterparts • Limited risk limits available globally

  17. FAME Paper vs. FAME Physical

  18. Physical vs. Paper Spread

  19. Gasoil Paper vs. Physical

  20. Joachim EmanuelssonSCB www.starcb.com

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