Malaysia’s biodiesel exports plunge in February on weak demand

28 March 2011 09:46  [Source: ICIS news]

SINGAPORE (ICIS)--Malaysia’s biodiesel exports came to a virtual standstill in February because of weak demand and stricter environmental regulations in the key export market of Europe, industry sources said on Monday.

The country exported 14 tonnes of biodiesel in February, down by 17,532 tonnes from a year earlier, statistics from the Malaysian Palm Oil Board showed.

Market players said the renewable energy directives (RED) in Europe – a key export market for biodiesel – that came into effect on 1 January this year, were the reason behind the drastic drop in exports.

“Now, all exports of biodiesel into Europe need to be certified that they have passed the 35% Green House Gas (GHG) emissions criteria and it is not easy to get the certificate, as exports need to pass stringent tests. So this is the one of the reasons that exports have dipped,” said a Singapore-based biodiesel trader.

Moreover, players said demand for biodiesel was weak at present because of the availability of competitively priced alternative biofuel from soyabeans and rapeseed in Europe.

“Soy methyl ester and rapeseed methyl ester are available at almost the same prices or slightly higher than palm oil-based biofuels, so there is less incentive for buyers to buy palm-based biofuel, especially in winter,” said a biodiesel producer in Malaysia.

Winter is traditionally a lull demand season, as palm oil-based biofuels are known to clog up the engines of vehicles because of its high 13–15°C cold filter plugging point (CFPP). 

CFPP is the lowest temperature at which fuel can freely pass through a filtration system.

Furthermore, despite the downtrend seen since the start of this year, biodiesel prices were still higher as compared with the same period a year earlier, players said, referring to the reason for the current weak demand.

Biodiesel prices were last assessed at $1,160–1,180/tonne (€824–838/tonne) FOB (free on board) southeast (SE) Asia on 24 March, down by $30/tonne from the previous week but $250/tonne higher than the same period a year earlier, ICIS data showed.

Meanwhile, some market players said they were not optimistic that demand would improve ahead of the traditional peak period in June–August.

However, others told ICIS they were positive that demand would rebound during that period, as biodiesel prices were expected to fall on the back of a better palm harvest yield.

“If palm oil biodiesel  prices continue to fall even further during the European summer months, then there would be a lot of incentive for buyers to choose palm oil biofuel over the other vegetable oil biofuels, as cost savings could amount to quite a bit,” said the Singapore trader.

($1 = €0.71)

By: Serena Seng

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