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Biodiesel can boost crude palm oil price

Implementation of the B10 biodiesel mandate this year can support crude palm oil (CPO) prices to trade above 2,000 ringgit (US$551) per tonne, according to the Malaysian Biodiesel Association

Zunaira Saieed (The Jakarta Post)
Petaling Jaya, Malaysia
Mon, March 2, 2015

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Biodiesel can boost crude palm oil price

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mplementation of the B10 biodiesel mandate this year can support crude palm oil (CPO) prices to trade above 2,000 ringgit (US$551) per tonne, according to the Malaysian Biodiesel Association.

'€œEvery 100 ringgit increase per tonne in CPO price would contribute 2 billion ringgit to our GDP (gross domestic product),'€ says the association'€™s deputy president U.R. Unnithan.

He also expects the implementation of the B10 and B20 biodiesel programes to contribute 4.6 billion ringgit and 34.6 billion ringgit respectively to the country'€™s GDP in the future.

B10 biodiesel is a blend of 10 per cent palm oil methyl ester and 90 per cent diesel, while B20 contains 20 per cent of palm oil methyl ester.

At the recent Reach & Remind Friends of the Industry Seminar 2015 & Dialogue, Unnithan calls for the B10 biodiesel mandate to be implemented right away across all sectors to mitigate the dip in CPO price as well as to utilise stock when CPO production picks up by the end of Q1 this year, as the B10 biodiesel programme is expected to take up one million tonnes from annual domestic palm oil stocks.

In line with Indonesia'€™s implementation of B20 biodiesel next year, Malaysia should also target B20 for next year, he says, adding that B20 can use up to two million tonnes of CPO.

Unnithan tells StarBiz that the Malaysian Biodiesel Association'€™s 21 members have the capacity to produce 2.7 million tonnes of biodiesel, but '€œcurrently they are only utilising around 22 per cent of their capacity using 600,000 tonnes of CPO.'€

Implementation of B10 would see the members utilising up to 37 per cent of their capacity, and B20, 74 per cent of capacity, he says, adding that if the capacity is not increased, there could be a surplus in domestic CPO stocks which could result in downtrend in CPO price.

On the National Automotive Policy 2014, Unnithan says the government is moving towards Euro 5 grade diesel, from Euro 2.

Euro 2 diesel contains 500 parts per million (ppm) of sulphur while Euro 5 has only 10ppm. This lower sulphur content in Euro 5 reduces the lubricity in the diesel which could lead to '€œfuel pump wear and engine breakdown'€, he says.

Unnithan suggests a higher blend of biodiesel with high grade diesel would improve lubricity, thus reducing retail price of the diesel by eliminating the need for lubricity additives.

Meanwhile, CIMB Research forecasts positive CPO prices due to the government'€™s implementation of B10 biodiesel as well as collaboration with Indonesia to promote palm oil.

The research house expects CPO prices to trade in the range of 2,000 ringgit to 2,500 ringgit per tonne this year, supported by low stockpile and wet weather conditions. (***)

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