Tag: biodiesel

© Nikkei Markets

KUALA LUMPUR (Feb 12) — Malaysia is aiming for domestic annual demand of crude palm oil to rise by 1.3 million metric tons in 2020 as it presses ahead with biodiesel programs in the transport and industrial sectors, the federal plantation minister said Tuesday.

“By increasing the blending percentage from B10 to B20, and also rolling out the B10 for industrial diesel use, we anticipate that the uptake of CPO to increase to 1.3 million tons per annum,” Teresa Kok said at a palm oil forum in the administrative capital Putrajaya.

Malaysia already trails Indonesia, which introduced B20 – a blend of 20% palm oil and 80% fossil fuel – to its transport sector in 2016. The move will help stabilize palm oil prices and reduce stock, Kok said.

Shares of palm oil producers rose further following the minister’s remarks. Sime Darby Plantation rose 0.4%, while the Bursa Malaysia Plantation Index climbed 1% and outperformed the broader market decline.

The gain also comes as stockpile in Malaysia, the world’s second-largest palm oil producer after Indonesia, eased off record-high levels as exports surged. Malaysia’s palm oil inventory dropped 6.7% to 3 million tons in January from a month earlier, official data released Monday showed.

Exports of the widely-used edible oil surged 21.2% to 1.68 million tons in January, in part due to changes in Indonesia’s export tax structure and cut in India’s palm oil import duties. The mammoth palm oil inventory fell for the first time in seven months.

Palm oil is a key export commodity of the trade-reliant nation and makes up the second-largest shipment after electrical and electronics items. Weakness in overseas demand typically swells stockpile of the commodity that is used in everything from ice creams to lipsticks. Hefty inventory also weighs on the palm oil’s prices and potentially pressures earnings of plantation companies.

Malaysia’s Prime Minister Mahathir Mohamad had said in December the country should move towards adopting B20 biodiesel program by 2020. Malaysia rolled out B10 biodiesel, a blend of 10% palm oil and 90% petroleum diesel, for the transport sector on Feb 1.

The industrial sector is expected to start using B7 biodiesel from Jul. 1.

“We still need to monitor for few months to see how much CPO is being consumed for the biodiesel program,” said Public Investment Bank Analyst Chong Hoe Leong. “Our domestic consumption is weak.”

In the near term, analysts said production will likely weaken seasonally in the months ahead, helping to prop up crude palm oil prices at least in the first quarter.

“We expect further moderation of stock levels in the coming months, as output continues to dwindle,” said RHB Research Institute Analyst Henry Wibowo. That could help crude palm oil prices to stay buoyant for the rest of the quarter and stabilize in the second quarter, he said.

The most-traded palm oil futures for April delivery was last traded at 2,249 ringgit a ton on Bursa Malaysia Derivatives. Palm oil prices have risen close to 7% so far this year.

– By Gan Pei Ling and Gho Chee Yuan
– Edited By Abhrajit Gangopadhyay

© Nikkei Markets

KUALA LUMPUR (Nov 26) — Malaysia will start implementing a so-called B10 biodiesel program for the transportation sector from Dec. 1 and will expand it to the industrial sector from Jul. 1, 2019, the minister of primary industries said Monday as the country seeks to cut fuel import bill and boost local consumption of a commodity that is widely used in food-to-cosmetics.

The expanded biodiesel program is expected to consume 761,000 tons of palm oil a year, Teresa Kok said at a news conference in Kuala Lumpur. The move will also help Malaysia save about 1.64 billion ringgit ($391.13 million) in annual diesel import cost, she said.

“At the current low price of palm oil, now is the right time to implement the expanded biodiesel program (which was) deferred in 2016,” Kok said.

The biodiesel program, which aims to blend 10% of palm-based methyl ester with 90% traditional petroleum diesel for sale at retail pumps nationwide, was initially designed in 2013 in-part to cut the Southeast Asian country’s swelling palm oil inventory that weighed on prices of the commodity.

However, the program was deferred multiple times due to concerns over potential damage to vehicle’s engine that may prompt manufacturers to dishonor their warranty pledges. A steep decline crude oil prices in 2014-15 also dimmed appeal of the mixed-fuel program.

Palm oil futures and shares of palm oil producers fell. Analysts said the prices of crude palm oil is unlikely to rebound significantly in the near term after declining about 20% due to supply glut.

If Malaysia successfully shrinks inventory by raising palm oil in biodiesel usage, the move could support prices at current levels “but will not drive prices up in the short term,” said JF Apex Securities’ Analyst Low Zy Jing. Prices will likely trade between 2000 ringgit per ton and 2200 ringgit a ton for up to next six months, he said.

“There’s no expectation of shortage of a supply, so buyers do not need to hedge,” and those with stocks are trying hard to sell outstanding inventories and are unlikely to raise prices, Low added.

Shares of Sime Darby Plantation, the world’s biggest palm oil producer by acreage, fell 2.3% on Monday, while the broader Bursa Malaysia Plantation Index shed 1.5%. The most-traded palm oil futures for February delivery fell nearly 2% to 2004 ringgit on Bursa Malaysia Derivatives.

Malaysia’s palm oil inventory swelled in October to a 10-month high as production rose while exports fell, according to latest available data. Production of palm typically enters its peak season in the third and the final quarter of the year which are the wettest months in Malaysia.

Biodiesel is currently priced at 2.28 ringgit per liter, while diesel costs 2.31 ringgit per liter. Introduced in Nov 2014, Malaysia’s current B7 biodiesel program for the transport sector utilized 350,000 metric tons of palm biodiesel annually.

Petroleum companies have been given two months to switch to B10 from B7 program before its mandatory implementation from February 2019, Kok said.

Indonesia meanwhile is planning to issue a regulation on the production of B25 diesel early next year, Jakarta Post had reported in May. Once issued, the policy will replace the current regulation on B20 production, the newspaper had reported.

Malaysia and Indonesia collectively account for more than 80% of the global supply of palm oil.

– By Pei Ling Gan and Alexander Winifred
– Edited By Abhrajit Gangopadhyay

© Nikkei Markets

KUALA LUMPU (Nov 08) — Malaysia plans to soon present a cabinet note that proposes implementation of B10 and B7 biodiesel programs, the minister for primary industries said Thursday. 

“I’ll present a cabinet paper on the implementation of biodiesel B10 for the transport sector and B7 for the industrial sector soon,” Teresa Kok said at a news conference in Purtrajaya. 

The comments follow last week’s budget announcement that proposed implementation of the B10 and B7 biodiesel programs from the next year. 

The biodiesel program, which aims to blend 10% of palm-based methyl ester with 90% traditional petroleum diesel for sale at retail pumps nationwide, was initially designed in 2013 in-part to cut the Southeast Asian country’s swelling palm oil inventory that weighed on prices of the commodity.

However, the program was deferred multiple times due to concerns over potential damage to vehicle’s engine that may prompt manufacturers to dishonor their warranty pledges. A steep decline crude oil prices in 2014-15 also dimmed appeal of the mixed-fuel program.

Meanwhile, Malaysia and Indonesia, the world’s two top producers of palm oil, will jointly combat anti-pam oil campaigns, Kok said.

Kok said Malaysia and Indonesia reject the EU’s Renewable Energy Directive II, which discriminate against palm oil, and the countries will jointly seek new markets for the commodity that is used in everything from ice creams to lipsticks. 

E.U. lawmakers have approved draft measures to reform the local power market that seek to lower energy consumption to meet broader climate goals. The plan includes a ban on the use of palm oil in motor fuels from 2021.

The EU move comes despite heavy protests from Malaysia and Indonesia which together account for more than 80% of global palm oil output.

“We’re very unhappy with EU. We’re doing our very best. We feel that our efforts are not being appreciated,” Kok added. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay