Biodiesel Feedstock Palm Oil to Rebound in 2014

cargillpalmThe past year was a pretty tough one for biodiesel feedstock palm oil, but traders are expecting it to rebound in 2014. This story from the Malaysia Star says overproduction and anti-palm oil campaigns in some countries took their tolls, but there are some real positives on the horizon for palm oil and, consequently, biodiesel.

The Indonesian government recently set a higher requirement for a 10% palm oil biodiesel blend, up from 7.5% previously, that will lead to more CPO feedstock needed for biodiesel production in the republic, hence prompting lesser CPO to be exported for the world market.

Malaysia too is pushing hard for the nationwide implementation of its B5 biodiesel programme by July 2014. At the same time, the Government is also studying the possibility of introducing higher blends – B7 and B10 biodiesel – in the foreseeable future.

The B5 biodiesel is a blend of 5% palm oil or palm methyl ester with diesel fuel.

The full implementation of B5 nationwide for the subsidised and non-subsidised sectors will also see about 500,000 tonnes per year being taken up from the current local palm oil inventory.

This could effectively reduce the domestic palm oil stocks to below one million tonnes, and also, the palm biodiesel initiative could provide a floor price to support CPO prices at RM2,000 per tonne.

Some traders do warn that the Southeast Asian countries’ biodiesel mandates will only be effective if palm oil prices stay competitive with crude oil.

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