KUALA LUMPUR (Jan 18): Public Investment Bank Research has maintained its “Neutral” rating on the plantations sector and said the decision to phase out palm oil from European Union (EU) biofuel was not a good solution for all parties.

In a sector update today, the research house said the decision to ban palm oil from being used as biofuel will not only significantly affect the palm oil trade, but will also make renewable fuels more costly, as palm oil is one of the most cost-efficient vegetable oils.

“Once the new legislation takes effect, we estimate that Malaysian palm oil volume to EU region will be slashed by at least 50% or about 800,000-900,000 mt.

“To minimise the potential impact, the Malaysian government should start looking into new export market and promote the use of palm oil in other ways,” Public Investment Research said.

To recap, the EU lawmakers had voted on removing biodiesel made from palm oil, the highest emitting biofuels in the market today, from the list of biofuels that can count towards the renewables target in 2021.

PublicInvest Research said this meant drivers in the EU region will no longer be able to burn palm oil in their vehicles in the future.

The research house said the EU market accounted for 12% of Malaysian palm oil exports last year, making it the biggest buyer after India.

PublicInvest Research forecasts full-year crude palm oil price at RM2,500 per tonne.