The Edge Markets (24/06/2020) - KUALA LUMPUR (June 24): With demand for crude oil dropping sharply, leading to a steep fall in crude oil prices, the viability of the biodiesel business has also weakened significantly, putting both Malaysia and Indonesia’s biodiesel mandates under pressure.

However, there is a silver lining in the dark clouds, as the world has seen the benefits of an almost 5.5% reduction in greenhouse gas emissions during the global lockdown due to the COVID-19 pandemic, said Sumwin Group founder and chief executive officer (CEO) UR Unnithan.

“This has got climate change experts, policymakers, non-governmental organisations and consumers thinking about a new world, towards a greener economy with a greater share for renewables, which augurs well for the palm oil industry,” he said.

Unnithan said this during his presentation titled “Challenges and Opportunities for the Palm Oil Industry in the Areas of Biodiesel, Sustainability and Food Safety” at the Palm Oil Internet Seminar (Pointers), organised by the Malaysian Palm Oil Council (MPOC) and Bursa Malaysia, taking place from June 22 to 28.

He said the gross domestic projection for diesel demand looks bearish, with the 2020 forecast (2020F) declining 3% before increasing to 4.5% next year.

China’s 2020F diesel demand falls to 1.2% versus 6.1% in 2019, and is expected to improve to 9.2% in 2021, while India’s 2020F demand declines to 1.9% from 6.1% recorded last year, and is projected to rise to 7.4% in 2021.

Quoting the Malaysian Palm Oil Board (MPOB), Unnithan said biodiesel exports fell by 5% from January-April 2020 compared with the same time last year.

The government’s B20 biodiesel programme roll-out (20% palm oil and 80% petroleum diesel) will commence in September 2020, to be completed by June 2021.

The programme is expected to boost the nation’s edible oil's uptake to 534,000 tonnes per annum, and when combined with the current B7 biodiesel programme for industrial applications, local palm oil consumption is expected to rise to 1.3 million tonnes annually.

Meanwhile, in his presentation titled “Malaysian Palm Oil Industry Outlook and Biodiesel Mandates”, MPOB director-general Dr Ahmad Parveez Ghulam Kadir said for January-May 2020, the Malaysian palm oil industry saw a weaker performance across all key indicators, except crude palm oil (CPO) prices and closing stocks.

“The year-on-year performance is expected to improve in the second half of 2020 (2H20) following the prospects of higher CPO production and a better export performance.

“The current rebound in CPO prices is expected to be sustained in 2H20, supported by the B20 programme and the government’s implementation of the export duty exemption for crude palm oil, crude palm kernel oil and processed palm kernel oil from July to December,” he said.

He added that this is expected to improve the overall palm oil export performance in 2H20, cushioning the impact from the global economic slowdown arising from the Covid-19 pandemic.

Read more at https://www.theedgemarkets.com/article/low-crude-oil-prices-put-pressure-malaysia-indonesia-biodiesel-mandates