Issue 3 - American Palm Oil Council

South Korea has no domestic oil reserves,
and is the world’s seventh-largest
consumer and fifth-largest importer of
crude oil. B5 bio-diesel (a 5% blend for
private vehicles), went on sale in July. As
the government gives tax waivers for use
of clean fuel, bio-diesel is about 7 won
(korean currency) lower per litre against
regular diesel. B20 bio-diesel (20% biodiesel:
80% mineral diesel) is being
considered for future use.
Japan, the world’s fourth-largest energy
consumer, remains highly dependent on
oil imports. The 2002 Law Concerning
Special Measures for Promotion of the
Use of New Energy requires all electric
power utilities to supply 1.35% of total
electricity from renewable sources by
2010. The government has also set a
target of 3% of total energy consumption
from new sources by the same year.
But availability and stability of supply are
a major problem in developing a bio-fuel
market. In May 2005, Japan signed a
US$578 million loan agreement with
Brazil to finance infrastructure, which will
result in increased bio-fuels exports to
Japan. The Japanese government had
aimed to introduce automobile fuel
containing 3% bio-ethanol in the market
in 2005, but the plan failed because of
inadequate supply.
In China, the Renewable Energy Law,
endorsed in February 2005, raised the
target from the present level of 3% of
renewable energy to 10% by 2020.
This is equivalent to one-third of Malaysia’s
current CPO inventories, which suggests that
the perceived large quantity would very quickly
be absorbed. Interestingly, the 1.6 million tonne
inventory set against today’s global use is
equivalent to only 17 days of consumption.
Exports to Asia
Due to logistical reasons, the bio-diesel
market is expected to be quite fragmented -
soybean-based bio-diesel or corn-based bioethanol
is likely to be utilised in the Americas;
rapeseed-based bio-diesel will be dominant in
the EU; and palm-based bio-diesel in Asia.
Asian countries like Japan, Singapore,
Korea, China and India are signatories to the
Kyoto Protocol. Some governments have
announced their bio-fuel policies, which
should be positive for CPO in the medium and
long term, as this will soak up more inventories.
The Indian government has foreshadowed
the mandate of B20 by 2011, but is likely
to focus on jatropha oil (an inedible crop
that can grow in arid areas) to supply biodiesel.
Not yet commercially planted
anywhere, it also has a low yield.
In Singapore, the Kyoto Protocol came
into force in July after it formally
submitted its acceptance of the agreement
on April 12, 2006.
Palm-based bio-diesel is the most logical
choice for Asia as it is the cheapest vegetable
oil and, therefore, the lowest priced
feedstock. The yield is about 5-6 tonnes per
ha (the highest among the oil crops) and
therefore, supply is readily available.
Tan Ting Min
Analyst, CSFB
The views expressed are those of the writer.
GLOBAL OILS & FATS BUSINESS MAGAZINE •VOL.3 ISSUE 3, 2006 9