Local biodiesel demand reaches record levels, boost to CPO price

The country’s biodiesel demand reached 529,200 tonnes up to October, surpassing the earlier estimation of 520,000 tonnes


MALAYSIA’S rising demand for biodiesel has helped push the prices of crude palm oil (CPO) to levels last seen two years ago, offering some respite to a topsy-turvy year for the country’s key export commodity.

CPO was quoted at RM2,585 yesterday at Bursa Malaysia Derivatives Exchange, slightly lower than the RM2,600 level reached this week, but still a major jump from the RM1,950 level in June this year.

Malaysia has been trying to trim CPO stocks by pushing for a higher content of biofuel.

The country’s biodiesel demand reached 529,200 tonnes up to October, surpassing the earlier estimation of 520,000 tonnes, according to the Malaysian Palm Oil Board (MPOB).

The amount almost doubled the local biodiesel demand compared to the same period last year at only 286,900 tonnes and eclipsed the full-year figure of 515,467 tonnes of export last year.

MPOB DG Dr Ahmad Parveez Ghulam Kadir said the achievement is supported by the current green fuel B10 programme mandated in the transportation sector since February, as well as the B7 mix in the industrial sector enforced since July.

“We have set to get 761,000 tonnes of local demand for one year, which started with the B10 in February and B7 for industry subsequently in July.

“If we proportionate to the months for both usages, it should be achievable and we are basically on target,” he told The Malaysian Reserve yesterday.

The green fuel B10 mixes a blend of 10% palm oil and 90% fossil fuel.

Ahmad Parveez said the success of the programme and impact on the sector would encourage the implementation of B20 which has been slated for next year.

The move will further lift CPO price which had been dogged by excess production, trade threats and rising stocks.

CPO price has surged to a two-year intraday high of RM2,657 on Monday, while stock piles dropped 4.1% from a month earlier to 2.35 million tonnes in October.

The Nov 11 is also four months record-high since July with only RM1,950, which is also 2019 lowest.

CPO price continued its rise despite the threat of a boycott by Indian importers.

Ahmad Parveez said worries over the possible boycott had been overshadowed by Putrajaya’s commitment to implement the B20 by the end of next year.

The move was outlined in the Budget 2020. Indonesia has also pledged to mandate B30 by January and further eyeing B50 by 2021.

“This could also attribute to the continuous effort to increase the Malaysian Sustainable Palm Oil (MSPO) certification rate,” he said.

As of Sept 30, about 55% or 3.19 million hectares of oil palm plantations in Malaysia have received the MSPO certification, according to Primary Industries Minister Teresa Kok.

Ahmad Parveez said MPOB has seen the uptrend of CPO price for a few months but did not anticipate the strong jump.

“Although we have to face a lot of issues such as what is happening from India, eventually, we could see the other market is catching up,” Ahmad Parveez said.

He added that the Indonesian government move increase the composition of palm oil in green fuel would demand about 10 million tonnes of palm oil from the market.

For Malaysia, he said another three plants to process CPO into the palm methyl ester has been established since June and there are 18 such facilities in the county.

Ahmad Parveez said up to 290,000 tonnes of biodiesel had been exported in the first half of this year, mainly to Europe, China, Japan and India.

“Despite the sentiment which is worrying us, the take-up rate could be higher than last year which was about 515,000. We are even seeing demands from Europe increasing,” he added.

Ahmad Parveez said half of the blending depots which are operated by oil companies are ready for next year’s adoption.

“They need to change some parts of the blending process such as the hose, tank, valves or pump. It affects a lot of parts, (but) I think some of them are ready,” he said.

(Editor – Paragraph 5 has been edited for clarity and correctness.)