High palm oil prices could hit Malaysia biodiesel

16 February 2007 10:29  [Source: ICIS news]

SINGAPORE (ICIS news)--High palm oil prices and lower crude values will dent Malaysia’s objective of becoming a leading biodiesel supplier, analysts warned on Friday.

 

Concerns about short-term profitability have gripped projects as palm oil, the main additive to produce biodiesel, hit $545/tonne after surging 40% in 2006.

 

“It really does depend on what subsidies projects have, but profitability for biodiesel plants has come off the boil,” said Ivy Ng, an analyst at Kuala Lumpur-based brokerage CIMB.

 

Palm oil prices are now around $100/tonne higher than current crude oil values, which hit a high of $550/tonne in July 2006 but have fallen back to around $446/tonne.

 

“Palm oil prices have not fallen in tandem with crude and if crude doesn’t recover to higher levels seen last year, we may not see any upside for biodiesel,” said Alvin Tai, an analyst at OSK Investment Research in Kuala Lumpur.

 

For more on this story see the ICIS Chemical Business magazine’s  February 26-March 4 issue.

By: Matt Kovac
+65 6780 4359

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