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Malaysia's Palm-based Biodiesel Exports Set to Drop to Lowest Since 2017

March 23, 2021

Credit; asnidamarwani/AdobeStock
Credit; asnidamarwani/AdobeStock

Malaysia's exports of palm-based biodiesel are likely to fall this year to their lowest since 2017 due to European Union restrictions and the coronavirus pandemic, the Malaysian Biodiesel Association (MBA) said on Tuesday.

Exports from Malaysia are estimated to fall to 350,000 tonnes from 378,582 tonnes in 2020, MBA president U.R. Unnithan said at the Virtual Palm and Lauric Oils Price Outlook Conference.

The European Union accounts for nearly 80% of Malaysia and Indonesia's exports of palm methyl ester (PME), the bio component of biodiesel that comes from palm oil.

Exports, however, have slowed since the bloc in 2019 moved to cap the use of palm oil for transport fuel at 2019 levels due to deforestation concerns, with an aim to phase out its use by 2030.

"(Malaysia's) biodiesel exports are unlikely to best the performance seen in 2019 due to the EU Delegated RED II Act," Unnithan told the conference.

MBA estimates the EU's total consumption of palm biofuel in 2019 was 6.2 million tonnes. It said that actual exports this year will start at much lower levels because EU member states pushing for a no palm-biofuel agenda can set a lower limit.

Some member states will also phase out palm biodiesel before the 2030 deadline, Unnithan said.

Exports this year will be the lowest in four years due to the impact of the EU rule, a rising crude palm oil-gas oil spread and reduced usage of vehicles due to coronavirus containment measures, he added.

A recent rally in palm oil prices amid lower crude prices pushed the edible oil to trade $455 above gas oil on Tuesday, making it a less attractive option for biodiesel feedstock.

Crude prices have declined on concerns that new pandemic curbs and slow vaccine rollouts in Europe will hold back a recovery in fuel demand, which collapsed last year as a result of global lockdowns to curb COVID-19 outbreak.

Malaysia's benchmark crude palm oil prices are trading at an average of 3,638 ringgit ($883.01) per tonne so far this year, up 34% from an average price of 2,700 ringgit throughout 2020. 

($1 = 4.1200 ringgit) 

(Reporting by Mei Mei Chu, editing by Louise Heavens and Susan Fenton)

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