• Speakers on the first day of Bursa Malaysia’s Palm Oil Conference spoke mainly on sustainability issues and the outlook of the oleochemical industry.

• Primary Industries Minister Teresa Kok said that her team is currently in Brussels to present Malaysia’s calculation on the indirect land usage (ILUC). If palm oil is considered to be a low ILUC risk, palm oil can be used in biodiesel in the EU. Recall that the EU has proposed to limit and phase out biofuels produced from feedstock that are high in ILUC risk by year 2030F. Feedstock, which are high in ILUC risk, include those planted on high carbon stock land.

• The minister also said that she will make public the country’s palm oil plantation map, including to environmental organisations to promote transparency. She added that travel agents in Malaysia are receptive to the idea of inviting foreign tourists to oil palm estates.

• Datuk Carl Bek-Nielsen of United Plantations said that palm oil accounted for less than 5% of the world’s deforestation from 1995 to 2015. The biggest culprit was the cattle industry. This was followed by the soybean and pork and poultry industries. He added that it is extremely difficult for smallholders to get their palm oil RSPO-certified when they are struggling to survive at low CPO prices. Less than 0.5% of the smallholders in Malaysia are RSPOcertified. Also, instead of just focusing on smallholders, it is important for global consumer companies to buy RSPO-certified palm oil. Presently, the take-up rate for RSPO-certified palm oil is only 50%. Smallholders are individuals who own less than 40 hectares of palm oil.

• Norman Ellard of IP Specialties Asia said that the outlook for oleochemicals is positive in 2019F. There is no huge increase in the global production capacity of synthetic chemicals or oleochemicals. At the same time, the personal care and cosmetics industries are growing at 5% to 10% per annum. Risk is a slowing global economy as economic growth is important in driving demand. Ellard said that global consumers are very price sensitive. Hence, oleochemicals need to be attractively priced to make the end goods affordable. Amongst others, oleochemicals are used in the manufacturing of soaps and shampoos. Currently, the global production capacity of fatty acids is 4.5mil tonnes per year. About 60% of the capacity are located in Asia.

• UR Unnithan of Sumwin Group said that in the long term, Malaysia’s biodiesel exports may be restricted by the protectionist policies in the US and EU. However in the short term, Malaysia may benefit from a potential drop in Indonesia’s biodiesel exports to the EU. We believe that the EU may impose non-tariff barriers on Indonesia’s biodiesel exports to protect its biodiesel producers. Globally, biofuel production is expected to increase in 2019F due to government mandates. Brazil, Malaysia and Thailand are expected to implement the B10 biofuel mandate this year while Peru may implement B5. Indonesia is anticipated to implement B25 this year and B30 next year.

Source: AmInvest Research - 6 Mar 2019