Malaysia prepares to increase biofuel to aid palm oil

Malaysia, the second largest palm oil producer after Indonesia, hopes to enhance biofuel consumption to help prices of palm oil.

700,000 tonnes of methyl ester will be used annually, if plans to apply the B7 programme next year go ahead.

This July will see the current B5 programme extended nationwide. The current version, which consists of a 5% palm methyl ester and 95% fossil diesel blend, will grow in demand.

Douglas Uggah Embas, plantation industries and commodities minister says: 'Now we're only using about 200,000 to 300,000 tonnes, but by the end of next year, we should be rolling out about 500,000 to 700,000 tonnes.'

Palm oil use reached its highest level since 2012 last year following a mandate presented by Indonesia, instructing the amount of biodiesel to increase, despite production falling for the first time in 15 years.

'Our move into biodiesel is also a factor that can assist the price,' emphasises Embas.

Palm oil on the Bursa Malaysia Derivatives grew by 9.4% last month, demonstrating the turnaround palm oil has had from a three-year low of 2,137 ringgit (€470) per tonne, in July last year. Embas looks forward to prices rising to 3,000 ringgit (€660) as biodiesel use and palm by-product demand grows.

James Fry, chairman of LMC International Ltd states: 'The jump in palm prices means discretionary blending in biodiesel is no longer attractive, so growth in demand will depend on the willingness of Indonesia and Malaysia to ramp up and enforce mandates.'

Malaysia and Indonesia are collectively responsible for 86% of the world's biofuel supply.