No significant impact from US on Malaysian biodiesel exports

PETALING JAYA: Malaysia’s palm-based biodiesel exports to the United States will not be “significantly” affected by the latter’s Environmental Protection Agency proposed 2014 Renewable Fuels Standard 2, which is aimed at reducing the annual volume of renewable fuel in the country, say industry observers.

Last year, local biodiesel exports surged to about 161,192 tonnes from just 28,983 tonnes in 2012, thanks to the narrowing premium of the crude palm oil (CPO) price over the crude oil price.

MIDF Research, in its latest report, said local plantation companies that produced biodiesel were not expected to be negatively impacted by the proposed new ruling.

“Based on the Malaysian Palm Oil Board statistics in 2012, the local biodiesel exports to the United States are ‘minimal’. In fact, most of the exports will go to Europe and Asia, which accounts for 75% and 23% respectively,” it said.

In the United States, palm oil is widely used as feedstock for biodiesel production, apart from soybean and corn oil. In terms of productivity, palm oil yield is about 5,000 to 6,000 litres of biofuel per ha versus corn at 1,500 to 4,000 litres per ha and soybean which is less than 1,500 litres per ha.

From a general perspective, MIDF said continuous export of palm oil to the United States was expected to be sustained.

As at end-September last year, an industry player said the Government has approved 60 biodiesel manufacturing licences with a total annual capacity of 6.5 million tonnes.

Of the total, 21 biodiesel plants have been commissioned since 2006 with production capacity of 2.96 million tonnes per year with 12 in operation with total annual production capacity of 1.22 million tonnes from January to September 2013, he added.

Malaysia’s biodiesel programme has contributed to a 44% increase in palm biodiesel production to 249,213 tonnes in 2012 from 173,220 tonnes in 2011.

According to MIDF, the CPO price is also not likely to be affected by the US-proposed rule-making.

“We expect the price to continue to recover and supported by fundamentals such as lower production and stronger demand from other importing countries,” it added.

As of 5pm yesterday, the third-month benchmark CPO futures for April closed RM1 lower to RM2,579 per tonne.

MIDF, which has a positive stance on the plantation sector, expected the improved CPO prices would also help to improve the margins of local plantation companies. The research unit’s average CPO price target is pegged at RM2,700 per tonne this year.