EU’s proposed ban on palm-oil biodiesel an industry dampener

KUCHING: The European Union’s ( EU) proposal on banning palm oil- based biodiesel serves as a dampener in the palm oil industry, says the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), as it is one of the palm oil consuming markets.

However, MIDF Research highlighted that based on the draft regulation, total ban on palm oil will not happen immediately and there is exemption to the ban which serves as loophole.

“This would provide time for Indonesia and Malaysia to react accordingly,” the research arm said.

“This would include creating awareness on the main reason behind deforestation, making further inroad into new and existing market as well as expediting the biodiesel mandate.

This would provide time for Indonesia and Malaysia to react accordingly.

“To be on the offensive, Malaysia is also looking at restricting imports of EU products, especially French products.”

MIDF Research recapped that the Malaysian Government has begun implementing the biodiesel mandate via the B10 and B7 programmes for the transportation sector and the industrial sector respectively to drive the demand for palm oil and increase the sustainability of energy resources.

“The B10 programme has commenced in February 2019 while the B7 programme is scheduled to be implemented from July 2019 onwards. These programme are expected to double the usage of palm oil to 761,000 tonnes annually. Furthermore, the Government has also plans to accelerate the biodiesel mandate to B20 by 2020.”

While MIDF Research is positive on the development, the research arm viewed that there is ample room for improvement.

“Taking cue from Indonesia, it plans to bring forward B30 implemention to 2019 from 2020,” it said. “On a long-term horizon, Indonesia will also continue its effort in making B100 a reality in 2022.”

According to MIDF Research, EU is the third largest consumer of palm oil globally, accounting for approximately 11 per cent of total global palm oil consumed.

This is after Indonesia (16 per cent) and India (13 per cent), it noted.

“However, we view that the consumption pattern could change should EU implement the ban, Indonesia implement more aggressive biodiesel mandate and higher export to Africa and Middle East.”

MIDF Research