Indonesia’s biodiesel plan fires up ‘red hot’ palm oil prices - Financial Times

Palm oil prices have soared as Indonesia, the world’s largest producer, prepares to increase the use of biodiesel made from the commodity, while output growth has been sluggish because of dry weather.

Benchmark palm oil prices in Malaysia are up almost a fifth from the start of the year at RM2,513 ($608) a tonne. They have risen nearly a third since this year’s low in July.

Palm oil has long been a key ingredient in food and cosmetics, including ice cream, chocolate, toothpaste and lipstick. However, it has lesser-known uses in biodiesel for cars and trucks and for heating and electricity.

The governments of Indonesia and Malaysia are pushing ahead with policies raising palm-oil content in biodiesel despite heightening concern in the west over the commodity’s environmental impact.

Last year, Jakarta mandated the increase of palm-based biodiesel in conventional diesel fuel from 20 per cent to 30 per cent, and this year Indonesian president Joko Widodo indicated he wanted B30 — fuel with 30 per cent biodiesel — to be in use by January next year, and B50 by the end of 2020.

Dorab Mistry, veteran oilseeds analyst and director at Indian chemicals manufacturer Godrej Industries, told an industry conference last week that sentiment in the palm-oil market was “red hot”.

“Biodiesel usage has become the spark to ignite the rally,” he said, adding that Mr Widodo’s support for B30 had been “a game changer”.

Indonesia accounts for more than half of global palm oil output, with Malaysia the second-largest. The two countries are behind about 84 per cent of world production, according to US Department of Agriculture data.

Using palm-based biodiesel increases Indonesia’s demand for the commodity as well as reducing the country’s import bill for fuel, said Edward Hugo, analyst at brokers VSA Capital. “These are ambitious goals and would have a significant impact on global [palm oil] prices if enacted,” he said.

The increased demand from biodiesel producers has coincided with expectations of low growth in Indonesian and Malaysian output in 2019 and 2020 because of dry weather and low or no fertiliser application following weak prices.

Western companies and governments have become more cautious about the use of palm oil because of concerns about environmental damage. With the increasing focus on deforestation caused by palm oil cultivation, the EU has ruled that the use of the oil for energy is unsustainable, although the phase-out is only starting in 2023, with a ban set to take effect in 2030. The move has led to tensions between the EU and countries that produce palm oil.

Earlier this year, Malaysia’s prime minister Mahathir Mohamad offered to strike a trade deal with post-Brexit UK provided it relaxed restrictions on imports of palm oil imposed by the EU

Environmentalists are concerned that rising demand for palm-based biodiesel will lead to further deforestation. With Mr Widodo even suggesting the mandatory use of 100 per cent biodiesel fuel, US think-tank World Resources Institute believes that a B100 mandate could encourage 7.2m hectares of land clearing — an area just smaller than the Czech Republic — if plantations do not increase productivity.

Let's block ads! (Why?)

"palm" - Google News
November 05, 2019 at 07:30PM
https://ift.tt/2NlKQVX

Indonesia’s biodiesel plan fires up ‘red hot’ palm oil prices - Financial Times
"palm" - Google News
https://ift.tt/2WAayZw
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update