No immediate impact on local palm oil consumption from biodiesel programme, says analyst

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NOT VISIBLE: Media reports indicate that Malaysia has rolled out its mandatory five per cent biodiesel implementation. However, according to Tai, data on local consumption of palm oil show that Malaysia’s palm oil usage has been steadily declining over the past few years. — Reuters photo.

KUCHING: Local consumption of palm oil has not seen any immediate impact from a recently implemented biodiesel programme which would have prompted mass quantities of the commodity.

Media reports indicated that Malaysia had rolled out its mandatory five per cent biodiesel implementation. The rollout, which started in June 2011 in the Federal Territories of Putrajaya and Kuala Lumpur as well as Malacca, Negeri Sembilan and Selangor, was now available at 1,150 retail stations in these areas.

Upon full implementation, Malaysia’s mandatory biodiesel programme should consume approximately 500,000 tonnes of palm oil, which would provide support for palm oil prices.

However, according to OSK Research Sdn Bhd (OSK Research) analyst Alvin Tai, data on local consumption of palm oil showed that Malaysia’s palm oil usage had been steadily declining over the past few years.

“In fact, during the June to December period last year when the biodiesel programme was rolled out, the nation’s palm oil consumption totalled 925,600 tonnes, which was 20.1 per cent lower than in the same period in 2010.

“We were initially bullish on the biodiesel rollout as it finally materialised after a delay of some five years. However, the programme does not appear to have boosted local palm oil consumption nor helped in paring down inventory levels.

“That said, we believe the biodiesel programme is more important now than ever, especially after Indonesia introduced a lower export duty on refined palm oil, as it represents another channel for Malaysia’s refined palm oil,” Tai opined.

He further explained to The Borneo Post that there were no immediate visible signs of the addition of biodiesel to petroleum-based diesel at fuel kiosks in the Klang Valley. This was further cemented by several consumers in the area who echoed Tai’s observation via phone.