Biodiesel set to ignite palm oil’s prospects

With crude oil prices soaring, Asian palm oil and South American soya oil producers see huge opportunities as countries seek vegetable oils to produce environmentally-friendly biofuels.
Analysts believe biodiesel usage has the potential to become the biggest component of growth in vegetable oils. It has already lifted once-depressed prices and forecasts point to a 5 to 10 % increase for most oils in the new year.

European governments are trying to promote the use of biofuel, notably biodiesel derived from vegetable oils and ethanol that can be produced from grains, sugar or biomass, to cut greenhouse gas emissions from fossil fuels.
“The total biodiesel capacity coming on stream in the US alone by the end of October 2007 will require 1.6 mm tons of soya oil,” said Dorab Mistry, industry analyst and director of Godrej International.

Dorab told that rising biodiesel usage will mean demand for edible oils will outstrip production by at least 6 mm tpy. Biodiesel output by 15 European Union (EU) members rose to an estimated 1.85 mm tons last year from 1.45 mm in 2003 and 1.05 mm tons in 2002, industry associations say.
To sell their oils, Malaysia and Indonesia have for decades looked at India, until recently the world’s largest edible oil importer. But now the countries, which also must battle with South American soybean oil producers, are increasingly looking to the EU.

Palm oil is one of the world’s cheapest vegetable oils and the EU imports about 3.5 mm tons of refined and crude palm oil every year, mainly from Malaysia and Indonesia. But the EU’s total edible oil imports -- which includes soy oils -- are expected to jump 8 % next year to 8.4 mm tons, as estimated by Oil World.
Analysts believe palm oil producers could be the big winner since it is the cheapest of the oils and easiest to work with when transforming into fuels.

Malaysian officials said the combustion grade of palm diesel from the country will be on par with winter-grade methylester produced from rapeseed, the top source of biofuel in Europe.
“But what makes the potential even greater is that palm oil is at least $ 200 ($ 1 = RM 3.77) a ton cheaper than rapeseed oil,” said Datuk Yusof Basiron, head of the government-run Malaysian Palm Oil Board.

Industry officials say biodiesel usage would also grow in countries such as Brazil, Argentina and Indonesia, which are all net vegetable oil exporters but crude oil importers.
Derom Bangun, chairman of the Indonesian Palmoil Producers Association, said Indonesia will soon move from the experimental stage in biodiesel to full-fledged manufacturing.
“Many investors are seriously considering to set up biodiesel manufacturing plants in Indonesia... this is an indication of the trend for new demand for palm oil,” Derom said.