OILS & FATS INTERNATIONAL (24/04/2025) - A potential shift towards higher palm oil-based biodiesel blends of 15%-30% (B15-B30) could reshape Malaysian palm oil demand dynamics, with consumption projected to rise between 380,000 tonnes and 1.5M tonnes, New Straits Times (NST) wrote.

This volume would be equivalent to 1.8%-7.4% of national crude palm oil (CPO) supply, according to CIMB Securities analyst Ivy Ng Lee Fang.

The step-up in blending mandates would mark a shift for the industry, exceeding increases seen under current policies, Fang was quoted as saying.

Malaysia plans to lift its blending mandate from B10 to B15, with an initial implementation of B12, as part of efforts to enhance energy security and reduce reliance on fossil fuels, according to the report.

Economy Minister Akmal Nasrullah Mohd Nasir said the transition would not involve additional costs, as it would use existing blending infrastructure under the current B10 programme.

The move followed discussions at the National Economic Action Council and formed part of a wider strategy to strengthen domestic diesel supply, NST wrote.

The government also outlined a biofuel roadmap that included phased depot upgrades to support higher blending rates of up to B20 and B30, alongside plans to introduce a B30 mandate for the commercial and public transport sectors.

Malaysia’s policy shift comes against a backdrop of a sharp rise in diesel prices, driven by ongoing tensions in the Middle East.

The near-term impact from the B12 implementation was unlikely to be significant, as the initial roll-out would only lead to a gradual increase in palm oil demand, Fang added, noting the current B10 programme consumed about 750,000 tonnes of palm oil/year at full implementation.

The planned rollout of B12 was expected to lift usage by a further 150,000-900,000 tonnes, or approximately 0.7% of Malaysia's projected 2025 output.

However, the impact would increase at higher blend levels, with B15-B30 likely to drive a step-change in demand, tightening supply balances and potentially influencing price dynamics across the sector, NST wrote.

In 2025, Malaysia produced 975,207 tonnes of biodiesel and exported 57,149 tonnes, suggesting domestic consumption of 918,058 tonnes.

Despite this, as installed biodiesel capacity stood at 2.36M tonnes/year – more than double current production – there was room for expansion if higher mandates were implemented, the report said.

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