Indonesia’s biodiesel mandate to help cut Malaysia’s palm stocks

KUALA LUMPUR: Indonesia’s plans for more widespread use of biodiesel could reduce its exports and global palm oil supplies, leaving Malaysia to fill in the gap in the export market, said industry analyst James Fry yesterday.

“That (Indonesia’s biodiesel mandate) is quite a significant help towards taking surplus palm oil out of the market, and that will eventually mean that stocks come down,” Fry said to reporters on the sidelines of an industry conference.

“You will find the rise in stocks in Malaysia would be slower than it would have been otherwise.”

Malaysia’s palm oil stocks rose 1.3% to 2.2 million tonnes at end-July.

Fry also said Indonesia’s implementation of its biodiesel mandate from Sept 1 will be felt in global markets. “Very quickly if Indonesia has less to export, it will tighten the Indonesian market and it will leave a gap for Malaysia to fill.”

Indonesia earlier this month announced plans to require all diesel fuel used in the nation to contain biodiesel starting from the beginning of September. Indonesia is trying to boost palm oil consumption to cut fuel imports and narrow its current account gap.

Its current mandate requires a 20% bio-content in biodiesel but that is only mandatory for subsidised diesel users.

Indonesia’s exports of palm oil, rose to 2.887 million tonnes from 2.48 million tonnes in June, a Reuters survey of two industry groups and a state palm oil research firm showed. – Reuters