• Bloomberg reported that Indonesia has won its anti-dumping appeal against the EU. An EU court has ordered the European Union to remove the 8.8% to 23.3% anti-dumping duties imposed on Indonesia's biodiesel products with effect from 16 March 2018.

• Argentina had already won its anti-dumping appeal against the EU. Hence, it was not a surprise that the court ruled in Indonesia's favour. The decision made by the courts in the EU may set a precedent or reference for the anti-dumping cases made against the USA. Indonesia has filed a complaint with the WTO on the USA's anti-dumping duties.

• Recall that the US Department of Commerce has proposed hefty anti-dumping duties on biodiesel products from Indonesia and Argentina. The case is still pending.

• We believe that the removal of the anti-dumping duties in the EU is positive for Indonesian biodiesel producers such as Wilmar International and First Resources as they can start exporting to the EU again. This would help alleviate the increase in palm inventory in Indonesia as industry palm production is expected to rise by 5.4% to 38.8mil tonnes in 2018F. According to Oil World, Indonesia produced about 2.95mil tonnes of biodiesel in 2017. Out of these, we reckon that subsidised domestic biodiesel consumption was 2.0mil tonnes while non-subsidised domestic consumption was about 178,000 tonnes.

• However, this development is negative for biodiesel producers in Malaysia. Malaysian biodiesel producers were the beneficiaries of the EU's anti-dumping duty on Indonesian biodiesel products. Malaysia's biodiesel exports surged by 181.5% from 83,581 tonnes in 2016 to 235,259 tonnes in 2017.

• Companies with biodiesel activities in Malaysia include Felda Global Ventures, Sime Darby Plantations and Genting Plantations. Some of the biodiesel producers in Malaysia also produce biodiesel for domestic consumption i.e. to fulfil the B7 biodiesel policy. Hence, the impact of the fall in biodiesel exports due to competition from Indonesia may be muted.

• We believe that the more pressing issues are the EU's proposed ban on palm biodiesel in year 2021F and China's threat of tariffs on the USA's soybean products.

• Bloomberg reported that President Trump is set to announce about US$50bil of tariffs on China over intellectual property violations today. There is risk that China will retaliate by imposing tariffs on a wide range of the USA's products including soybean.

• Maintain NEUTRAL on the plantation sector. We have a Buy on Genting Plantations with a fair value of RM11.50/share.

Source: AmInvest Research - 22 Mar 2018