Southeast Asian biodiesel struggles to find buyers

Southeast Asian biodiesel producers said it was unlikely exports will rise even as they are on track to have surplus product available.

Malaysia and Indonesia have been forced to cut back on consumption despite higher local mandates as Covid-19 lockdown measures have limited the need for transport fuel.

But barring a collapse in feedstock palm costs or recovery in gasoil values, arbitrage to the traditional markets of Europe and China will remain firmly shut.

Malaysia has postponed the nationwide rollout of its 20pc biodiesel mandate until the country lifts its movement control order.

Meanwhile Indonesian manufacturers have been running at full capacity to meet the domestic mandate which was raised to 30pc from 20pc this year. But the energy ministry said that just 2.1mn kl (1.66mn t) of biodiesel were blended in the first quarter and that for the year consumption is set to be 13pc down on initial estimates of 9.6mn kl.

Excess volumes are unlikely to find a home abroad though as the EU itself currently remains in the grip of the pandemic which is suppressing transport fuel and thus biodiesel appetite. Even once it recovers there remains in place 8-18pc anti-subsidy duties (ASDs) against Indonesian product that were brought in last year.

China has no nationwide mandate so only imports biodiesel when cost effective which usually means palm oil needs to be around $120/t cheaper than gasoil but is currently $230/t more expensive.

While the global slowdown is weighing on prices of the vegetable oil they are supported by weak output which sent Malaysian inventory levels below 1.7mn t in February, their lowest level since June 2017. Third-month crude pam oil prices on the fob Bursa Malaysia exchange closed yesterday at 2,194 ringgit/t ($502/t).

Indonesia biodiesel exports totaled 668,000t last year, though 593,000t of that total was shipped by August before the EU imposed ASDs and the B30 mandate was announced.

Malaysia exported 729,000t in 2019 as it was able to take some on Indonesia's market share in the second half of the year. But even of these volumes a large portion was re-exported waste-grade biodiesel cargoes from elsewhere rather than domestically produced palm-based product.

Amandeep Parmar