- Bloomberg reported that Malaysia will be delaying the nationwide implementation of B5 from July to December 2014.

- The delay was due to the construction of 15 blending facilities in Sabah, Sarawak and Labuan, which was taking longer-than-expected.

- According to the Plantation Industries and Commodities Minister, monthly usage of palm oil in biodiesel will rise to 41,667 tonnes from 20,833 tonnes after the nationwide rollout of B5.

- Upon the implementation of B7, it will increase to 58,333 tonnes. Currently, the government and palm oil board are in discussions with engine manufacturers and automobile associations to get warranties for B7.

- The implementation of B5 in Peninsular Malaysia was completed in March 2014.

- We are not surprised by the delay in the implementation of B5. What is new however, is the delay, which is now stretched to December 2014.

- In June 2014, Biofuels Digest reported that the rollout of B5 in East Malaysia would be delayed from July to September 2014.

- Apart from infrastructure issues, Biofuels Digest reported that biofuel suppliers want a premium selling price as logistics costs are high in East Malaysia.

- In any case, the incremental absorption of palm oil by the implementation of B5 in East Malaysia is not expected to be significant.

- We estimate that the rollout of B5 in East Malaysia would account for about 1.3% of Malaysia’s palm oil production of 19.5mil tonnes forecasted for 2014.

- As for B7, its implementation would result in an additional 200,000 tonnes of palm oil being taken out from the system.

- However, it remains to be seen if the rollout of B7 would also be delayed. Maintain NEUTRAL on the plantation sector.

Source: AmeSecurities