Tuesday April 17, 2012

Malaysian dilemma on biodiesel exports

Commodities Talk- by Hanim Adnan

CURRENTLY there is a grey area where the status of local palm biodiesel sector is concerned, be it in export or domestic consumption.

Despite being a leader in palm-based biodiesel or palm methyl ester (PME) back in 2005, Malaysia is now losing out to latecomers like Indonesia, Thailand and Colombia, which in turn are competitive players.

Malaysia's biodiesel exports were dismal at 50,000 tonnes last year (86,000 tonnes for 2010), which is a far cry compared with Indonesia's exports at 1.37 million tonnes.

Out of 48 million tonnes global CPO production last year, four major palm biodiesel countries produced about 45 million tonnes, whereby 8% of their production were converted to PME.

Argentina is another major biodiesel player which exported 1.6 million tonnes of soy-based biodiesel or soy methyl ester (SME).

While Indonesia and Argentina successfully exported 62% and 73% of their total biodiesel production last year, Malaysia exported less than half of its total PME production of 170,000 tonnes last year.

Interestingly, the country's total PME production last year only represented 6% capacity utilisation against the total installed capacity of 2.7 million tonnes from 23 biodiesel plants nationwide.

Judging by last year's biodiesel export performance and also, the “yo-yo” export trend in the first three months this year, one wonders how the fate of this once-touted as an exciting new revenue-generating sector for local players will turn out to be?

Export-wise, the local palm biodiesel is actually facing duty differential disadvantages when compared with Indonesia and Argentina, and that has seriously affected local PME exports.

Indonesia has been incentivising its biodiesel sector through a lower differential duty structure on its CPO feedstock, while Argentina has its duty structure modified whereby soy oil export duty at 32% is higher than its biodiesel export duty at 14.1% to encourage local blending.

As for domestic consumption, the national rollout of the B5 programme (blending of 5% biodiesel with 95% petroleum diesel) kick-off in June last year. It started with the central regional, covering Putrajaya, Malacca, Negri Sembilan, Kuala Lumpur and Selangor.

The Government through the Malaysian Palm Oil Board is also allocating RM43.1mil for the construction of B5 biodiesel in-line blending facilities nationwide.

However, despite much progress towards this effort, local biodiesel players are complaining that the pace of B5 implementation was still slow and want the Government to accelerate it further.

Malaysian biodiesel players also hope to see plans to increase the domestic consumption from B5 to B10 (10% biodiesel etc) to B20 programme to be mapped out properly.

Globally, there have been growing biodiesel mandates among several nations. This include Argentina from B5 (in 2010) to B7 currently and B10 by 2015 while Colombio is looking at the B20 programme by 2015 from B10 currently.

In Asia Pacific, Fiji is looking at voluntary B5, the Philippines with B2, Thailand with B3 and South Korea with mandates from B2 to B2.5.

In addition, Malaysian biodiesel players want investments into downstream value-added products from palm biodiesel to be incentivised by the Government accordingly.

Deputy news editor Hanim Adnan thinks the dilemma in local biodiesel lies in the high CPO price. More incentives and subsidies are needed now with the CPO feedstock is trading above RM3,000 per tonne.

More News

Business

Tuesday April 17, 2012

Malaysian dilemma on biodiesel exports

Commodities Talk- by Hanim Adnan