Malaysian biodiesel producers set to continue operations amid coronavirus shutdown

Malaysian biodiesel producers largely expect to continue operations for the next two weeks despite wide-ranging coronavirus measures being introduced in the country.

In a move to curb the coronavirus outbreak, Prime Minister Muhyiddin Yassin on Monday announced that effective March 18 all firms will be closed save for those involved in essential services such as water, electricity, energy, telecommunications, transport, oil, and safety and defense.

Public gatherings will be prohibited and movements of citizens going overseas and foreigners entering the country will be restricted.

"Core operations is business as usual, though administration, trading and marketing functions will be scaled down. We are considered as part of essential food supply as well as oil and gas," a Malaysia-based PME producer told S&P Global Platts.

Another Malaysia-based PME producer said: "The government had asked us to continue operations as we are supplying the local biodiesel mandate."

Another PME producer noted though that if exemptions were being granted to biodiesel producers, then mills and plantations should also be exempted.

Mills and plantations are currently appealing for permission to continue operations from the government.

Malaysia has a B10 local mandate for the transportation sectors and is seeking to ramp up the mandate to B20.

Recent falls in gasoil and crude palm oil (CPO) prices have put pressure on the blending mandate. ICE gasoil has fallen from $628.75/mt on March 3 to $312/mt on Monday, making blending more expensive.

While lacking a structured fund like Indonesia, Malaysia uses export duty and windfall tax to subsidize the blending mandate. Malaysia had cut export duty to 5% for April with a reference price of MR2,631.07/mt. Export duty was fixed at 6% for February and March. With CPO falling, export duty would go south, further decreasing the income the country needs to subsidize blending.

Meanwhile, with much of Europe in a lockdown because of the coronavirus crisis the biofuel market has been slow-moving and many producers do not see much of a need to quote offers.