Malaysian biofuel makers resume ops
Business Times
Wednesday, October 08, 2008
At the moment, four or five producers have started producing and some others are in the process of slowly starting, says a senior industry figure
SINGAPORE: A handful of Malaysian biofuel makers have resumed operations after a steep decline in feedstock prices, exporting some 20,000 tonnes of palm oil-based biodiesel a month, a senior industry figure said today.
But tighter margins and global financial turmoil will prevent many players from venturing into the risky business, Unni Krishnan Unnithan, deputy president of the Malaysian Biodiesel Association, said.
“At the moment, four or five producers have started producing and some others are in the process of slowly starting,” he said on the sidelines of a regional industry seminar.
“Overall we have just about reached 20,000 tonnes of exports per month from a few thousand tonnes which was being sold before July.”
Palm oil, the main feedstock for biodiesel in Malaysia, suffered its steepest fall in 23 years on Monday, dropping 9 per cent as the global credit crisis gripped the financial markets.
The tropical oil has lost more than half of its value since hitting a record high of RM4,486 (US$1,285) per tonne on March 4 on rising production and struggling exports.
Malaysia exports all of its biodiesel production, with most going to Europe and the US, and Asian nations such as Japan and South Korea buying smaller quantities.
In 2006, Malaysia took the lead in developing Asia’s biodiesel industry and granted licences to more than 90 firms to set up biodiesel plants, leading to a sharp rise in palm oil prices.
Most units which were built had to shut shop because of soaring raw material costs, while others just remained on the drawing board.
Unnithan, who is also the executive director of Malaysian biodiesel producer Carotino, said his company has restarted two plants with a capacity of 180,000 tonnes a year.
But Malaysian sellers are facing difficulties as buyers are not willing to commit to orders in turbulent market conditions, he said.
“The most difficult thing is that our buyers don’t want to take a position as the markets are sliding so fast.”
Malaysian biodiesel manufacturers are enjoying a very thin margin of around US$20 to US$30 because as rival crude oil has also been sliding, having lost 40 per cent of its value since a peak in July.
“Margins are very difficult to ascertain and are very low at the moment as crude oil is also dropping rapidly.”
Unnithan said the fall in palm oil prices is unlikely to encourage players to start building plants.
“I would imagine that the 15 plants that are on the ground will try and do something. But I don’t think the whole euphoria of 92 licences being issued and people setting up plants will happen in this situation.” - Reuters
