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Asia Biodiesel

Pertamina forecasts threefold Indonesian biodiesel demand surge next year

Indonesian biodiesel consumption should more than triple to 4.2mn t next year as the government drives its new B20 blending mandate with cash from its new biodiesel support fund, according to state oil firm Pertamina.

Indonesian biodiesel distribution this year is set to languish at 1.32mn t as the existing B15 mandate suffers from biodiesel’s price premium to weak international gasoil prices, Pertamina said. Since the first quarter biodiesel blending has largely evaporated as palm oil has sustained substantial premiums to gasoil prices, although demand is expected to resurface towards the end of this year. Since May the government has introduced a $50/t tax on crude palm oil exports, with the funds earmarked to bridge biodiesel/gasoil price differentials to achieve the ambition of increased domestic biofuel demand.

Indonesia announced the new biodiesel supports as part of a wider piece of legislation aimed at underpinning a domestic palm oil industry struggling with a more than 20% price drop since the start of 2014. Despite a sharp September rebound after a sustained summer selloff prices remain below their early June levels, with the market keenly awaiting Thursday’s fresh monthly Malaysian stocks to gauge sentiment.

FAS expects Indonesian palm production to hit a record 33mn t this year, up 8% YoY, but stagnate in the 2015/2016 marketing year. This should still nearly double this year’s ending stocks to more than 3mn t, FAS said in July. Higher domestic biodiesel consumption is expected to trim Indonesian palm oil ending stocks next year, although palm exporters are likely to see some business lost to rival Malaysian sellers given their new $50/t tax disadvantage.

MS – 09/09/2015

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