MPOC PRESS RELEASE: NIOP 2007 Annual Convention

Image Source : National Insitute of Oilseed Products (NIOP)

Demand for oils and fats for bio-fuel use will remain relatively large as long as prices are lower than fossil fuel equivalent. The market will eventually come to a balanced situation with the food sector having to pay a high enough price to compete for oils and fats supply which would otherwise be diverted to the bio-fuel market.

According to Dr Yusof, in countries such as the US, EU and Japan, where the ‘distance’ advantages are not significant and shipping costs from Malaysia or Indonesia are almost the same, there is a preference to import from traditional suppliers such as Malaysia for the security of added  quality assurance  and other after-sales services provided by experienced exporters.

He added that even countries which are net exporters of oils and fats, synergies are created by using palm oil either on its own or in combination with other oils and fats. For example, in the US, a synergy between palm and soybean oils has been created through the patented product formulation that initially targeted to meet the American Heart Association’s (AHA) Step-1 recommendation for dietary fat consumption. The blend comprising 50% palm oil, 40% soybean oil and 10% canola oil truly reflects synergy in the use of all the raw materials.

Dr Yusof urged the industry players to take the bold step of advocating a great synergy between soybean and palm oils to fill the void in the solid fats sector where past demand for solid fats was primarily met by partial hydrogenation of liquid oils, which are now associated with containing the undesirable trans fatty acids. 

Adverse health outcomes associated with the consumption of trans fatty acids (TFA)  and the on-going regulatory processes aimed at reducing or even eliminating TFA has created a major void in supply of raw materials (oils and fats) for solid fat formulations

“Since current palm oil consumption in the US accounts for less than 3-4% of the total oils and fats consumed, the synergistic effect from the combination of soybean and palm oils can only result in beneficial outcomes for the population. Despite this, the overall share of palm oil relative to the consumption of US produced local oils such as soybean, corn, canola and sunflower will register only a small growth over current trends” said Dr Yusof.

Participants at the conference which attracts a large gathering of oils and fats players were informed that Malaysia will have about 500,000 tonnes installed bio-diesel capacity from 10 bio-diesel plants. The output will be exported to Europe, US, and Japan.

Dr Yusof said that locally, the plants will market their output through the B5 blend to be mandated under the proposed Malaysian Bio-fuel Policy. The Malaysian bio-diesel policy provides for blending up to 5% palm methyl esters (B5) with petroleum diesel for local use. The bio-diesel programme provides a safety net strategy for the industry in that excess supply of palm oil can be diverted for use as bio-fuel. 

 It is generally accepted that bio-diesel will be able to compete with petroleum diesel if there is some form of subsidy, as seen in the EU and the US. Dr Yusof added that in view of the availability of subsidy, and with the Malaysian bio-diesel policy backed by a law to be passed in March, it is projected that the bio-diesel industry will be firmly established in the near future.

Dr Yusof said that there will be synergistic opportunities for increased international trade in bio-diesel.  “The availability of bio-diesel to supply shortages in the EU and other potential importing countries offers mutual benefits. The EU has set a target 5.75% bio-diesel by 2010 in its fuel mix to reduce over-dependence of fossil fuel. Recent review of the policy indicates a need to target the renewable fuel sector to provide up to 10% of EU fuel consumption. Even at the 5.75% target, some 10 million tonnes of bio-diesel will be needed by 2010.

EU rapeseed production amounts to 6 million tonnes, with limited prospects for further supply expansion.  Even if all the rapeseed available is used for bio-diesel production and none goes into the food industry, it will only be able to supply 60% of the target demand. Palm bio-diesel is best positioned to fill this supply gap”, he added.  

He stressed that although palm oil cannot solve the prevailing shortage of fuel supply and high petroleum prices because of the limited volume available in relation to the large volume needed for fuel it creates an opportunity to leverage on the bio-diesel demand. This means that palm oil prices need no longer be subject to oversupply gluts.

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Issued by Malaysian Palm Oil Council (MPOC)
For further information please contact:
Belvinder Sron Tel: 03- 78064097 / e-mail : bel@mpoc.org.my