Biodiesel Begins Trading on Platts

Cima Green, Augsburg Energy debut on Platts with a 5,000 barrel trade
By Ron Kotrba | March 09, 2011

Cima Green and offshoot Augsburg Energy announced in late January that the duo was the first to trade biodiesel on Platts, with an initial trade of 5,000 barrels (210,000 gallons). Andrew Pollack, senior director of marketing and logistics for Cima Green, says the move is intended to help make biodiesel mainstream by playing in the petroleum industry’s sandbox. Since the majors are familiar with trading on Platts, Pollock says trading biodiesel on the same platform will encourage market growth.

The two companies also say trading biodiesel on Platts will lead to transparency in the marketplace, although how much biodiesel needs to be traded before transparency and price predictability occur is anyone’s guess. However, Pollock says, “When there’s transparency in the marketplace, this provides trust and understanding.”

Katirina Tracy, Cima Green senior director of operations and procurement, says transparency will level the playing field between bigger and smaller producers. “We’re not trying to make everyone low-priced—just evenly priced,” she says. Today the brokers put the lowest of the low priced biodiesel out there as a teaser. If you ask someone today why they price biodiesel a certain way, they have no idea how to answer, she says.

One fuel wholesaler tells Biodiesel Magazine that in order for biodiesel to be traded successfully on Platts, Cima Green must bring a lot of product, go long on contract and be ready to hedge. “And if they can’t do it consistently, it’s only going to hurt the industry,” the source says. “I wish them well, but they have to do what we’ve all had to do—get established, get long-term relationships established, or else just become another name out there.”

Keith McHugh, Augsburg Energy portfolio manager, says the companies aren’t trading biodiesel on Platts in order to push a bunch of cheap product through. “Our intent is far more egalitarian,” he says. “I don’t need Platts. But I saw the need for Platts.”

In the earlier days of biodiesel, the strong push was on quality standards, says Joseph Furando, Cima Green senior vice president of sales and marketing. Over the years, however, the quality standard has improved, remaining a living document subject to change as needed. “Well, this is the first time the industry has come up with a standard for biodiesel pricing,” he says.

—Ron Kotrba

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