High palm oil forces Asia biofuel units to slow ops

04 July 2007 10:07  [Source: ICIS news]

By Anu Agarwal

SINGAPORE (ICIS news)--Southeast Asia’s biodiesel plants are running at low rates as expensive feedstock palm oil makes production unprofitable, biodiesel makers and traders said on Wednesday.

Workable prices for export of biodiesel are around $740-760/tonne FOB (free on board) SE (southeast) Asia, but palm oil price is itself around Malaysian ringgit (M$) 2,540/tonne ($725/tonne) making it impossible to produce and make any money, some Malaysia based biodiesel producers said.

“No more than 10 biodiesel plants are running in Asia,” said Chris De Lavigne, Global VP Consulting at Frost and Sullivan. And most are running are reduced capacity, he said.

Malaysia alone has granted over 90 licences to operate biodiesel plants over the last two years.

Crude palm oil prices have been driven up nearly 30% since March this year as supply has lagged behind buoyant food demand from countries like India and China. Increased demand for fuel use as well as high prices of other vegetable oils like soybean oil in the US have also pulled palm oil prices, up, said De Lavigne.

There is also a question mark about the actual start up of some of the newly constructed plants in the region, given such high palm oil prices, De Lavigne said.

“There is really not much activity in the Asian biodiesel market, many plants are either shut or mothballed,” said a Malaysian producer. Some plants which are running would be at reduced rates in order to honour old contracts, he said.

Crude oil prices at above $70/bbl have failed to make a dent in as the economics still don’t make sense as long as palm oil prices stay at current levels, said another Malaysia based biodiesel producer.

Some of the existing biodiesel producers in Asia include Wilmar in Indonesia, Vance Bioenergy, Golden Hope and Carotino in Malaysia and Continental Bioenergy in Singapore.

Other new facilities and those under construction for completion in 2007 include Vance Bioenergy’s 100,000 tonne/year plant in Malaysia, Mission Biofuel’s 100,000 tonne/year plant in Kuantan Malaysia, Nexsol’s ( JV of Peter Kremer and Kulim Malaysia) 100,000 tonne/year each in Singapore and Malaysia, Global Biodiesel’s 200,000 tonne/year facility in Sabah, Malaysia, Natural Fuels 600,000 tonne/year plant in Singapore and Wilmar’s 2- 350,000 tonne/year plants in Indonesia.

($1=M$3.45)

By: Anu Agarwal
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