KUALA LUMPUR: The February crude palm oil (CPO) stockpile is likely to fall below January’s level of 1.83 million tonnes due to floods in some palm oil producing states, Plantation Industries and Commodities Minister Datuk Peter Chin said.
“Biologically, the palms are producing less. I do not think this month is possible to see stockpiles to be at the same level in January,” he told reporters after a signing ceremony between OCNED Water Technology Sdn Bhd and Sumitomo Heavy Industries Environment Co Ltd (SHI-EV).
Industry players polled by Reuters had forecast that February’s palm oil stocks would probably fall to 1.67 million tonnes, which would be its lowest in 16 months. The Malaysian Palm Oil Board is expected to release production figures for February on March 11.
Based on a report by the US Department of Agriculture, heavy rainfall in East Malaysia had slowed down oil palm harvesting. Heavy rainfall also led to lower palm oil yields.
Crude palm oil (CPO) prices had increased by some 35% from a low of RM1,331 a tonne to RM1,879 a tonne on Bursa Malaysia Derivatives yesterday, as palm stockpiles had fallen from 2.2 million in November last year.
Demand for CPO this year had slowed this year because of slowdown in the economies of its key buyers. China, one of the key buyers of palm oil, is expected to grow at a slower pace of 8.5%. Palm shipments to China dipped 1% last year to 3.8 million tonnes. It was the first dip in 23 years.
Malaysia exports palm oil products ranging from biscuits to biodiesel. Some of its key markets include Pakistan, the Netherlands, the US, India, Japan, Jordan, Ukraine, the UAE, Singapore and European countries.
Palm oil exports, especially biofuels, to European countries could face a setback as a result of measures recently announced by the European Union (EU). Under its renewable energy directive, biofuel that was produced must save at least 35% of carbon emissions.
This would mean plantation players, including those with Roundtable on Sustainable Palm Oil (RSPO) certifications would also need to comply with the carbon emissions targets, RHB Research said.
“It would take some time before biodiesel players would be able to source all its feedstock from plantations with RSPO certifications, let alone to ensure that the carbon emission targets are met. As such, palm-based biodiesel players in Malaysia may find it difficult to export its products to the EU in the medium term,” it said.
Chin said: “We cannot deny that the methane gas from the effluent pond at the palm oil mills is emitted to the atmosphere. We are looking at ways to get rid of the emission. And this is where biogas trapping technology comes in.
“Once we contain the methane gas emission, our carbon emission would be far less than what the EU has set,” he said, adding that however the adoption of the new technology was slow among millers as it would be costly.
Malaysia has more than 400 palm oil millers, but “no more than 20 had implemented the technology”, Chin said.
OCNED Technology’s chairman Tan Sri Talha Mohamed Hasim said through the agreement between the company and SHI-EV, the two firms would place emphasis on adopting the new technology in palm oil mills.
Japanese conglomerate Sumitomo, through its subsdiary SHI-EV, will assist Malaysian firms in terms of capital investments to design and build biogas plants. Investments range between RM2 million and RM10 million per mill, OCNED’s managing director Dennis Tan said. He also said the firm had identified five investors, of which mainly would be from Japan.
In return, the investors would claim the carbon credits which could be traded in the open market as part of the Clean Development Mechanism under the Kyoto Protocol.
The carbon credit system was ratified in conjunction with the Kyoto Protocol to stop the increase of carbon dioxide emissions. Credits are awarded to countries or groups that have reduced their greenhouse gases below their emission quota.
This article appeared in The Edge Financial Daily, March 6, 2009.