Malaysia seeks to delay B20 biodiesel implementation citing COVID-19 difficulties

Singapore — Barely a week after Indonesia's disclosure of a funding conundrum over its B30 blending mandate, Malaysia has started to rethink its own blending program.

Malaysia's Ministry of Plantation Industries and Commodities requested companies to delay the nationwide implementation of the B20 biodiesel mandate, according to an official letter seen by S&P Global Platts on Thursday.

Citing the COVID-19 outbreak, the ministry sought to delay the implementation of the B20 program in regions not yet rolled out.

Malaysia previously planned to raise its mandate from B10 biodiesel in various parts of the country, starting in Langkawi and Labuan in January, Sarawak in April, Sabah in October, and rest of peninsular Malaysia in June 2021.

"The delay was expected given the CPO-GO price disadvantage and the lack of solid financial framework in place to subsidize the biodiesel program," said Sathia Varqa, owner and cofounder of Singapore-based Palm Oil Analytics.

A Malaysia-based producer Platts spoke to was not surprised at the turn of events in either Malaysia or Indonesia, citing the widening PO-GO spread as the reason for the financial impossibility of implementing the blending programs in both countries.

PO-GO is the relationship between feedstock palm oil and blendstock heating oil the biodiesel industry uses to gauge costs and margins.

Platts recorded the PO-GO spread at $264.10/mt on April 15. For discretionary blending to work, the spread must be in the negative $100s/mt.

Malaysian palm-based biodiesel producers are grappling with a dip in biodiesel demand from the current B10 blending mandate because of the Movement Control Orders implemented in Malaysia on March 18 due to COVID-19, and are expecting a fall in production between 20% and 50% month on month in April.

Palm methyl esther demand from Europe had also subsided in recent weeks while some inquiries for prices were heard from China.

Crude palm oil production in the country, on the other hand, is expected to increase 5%-10% in April despite the onset of Ramadan at the end of the month.