Thailand: Oil retailers urged to hold more biodiesel

Thailand: Oil retailers urged to hold more biodiesel

Oil retailers have been urged to stock up on biodiesel to help absorb more
palm crude supply from the market, which would indirectly push up the price
of palm fruit and support farmers, says to the Commerce Ministry.

Nuntawan Sakuntanaga, director-general of the ministry's Internal Trade
Department, said the ministry had asked retailers to store additional
biodiesel supply, which is blended with diesel petrol and sold as B7
nationwide.

B7 is 7% palm-based biodiesel blended with another 97% diesel. The product
is part of the Thai government's policy to make use of domestic biofuel crop
to help reduce the expensive import of fossil-petrol.

"The increase in biodiesel is aimed at increasing crude palm oil demand and
support the price of palm fruit eventually," said Ms Nantawan.

According to the plan, oil retailers would stock up a total of 90 million
litres, up 40% from 50 million litres previously. That would help absorb
76,000 million tonnes of palm crude supply from the market.

The country's rising biodiesel inventories could help cut the total palm
crude supply to around 370,000 tonnes nationwide, which would also reduce
pressure on price.

"With this strategy, we expect to push up prices of palm fruit higher within
a week," she said.

Thailand, the world's third biggest palm oil producer after Indonesia and
Malaysia, is forecast to produce 11.7 million tonnes of palm fruit in 2017.
That would equate to around 1.99 million tonne of crude oil production,
according to the Agriculture Ministry.

Of the total, around 1 million tonnes of crude oil would be for the food
industry, and the rest for the biodiesel industry.

Domestic Thai palm fruit production is normally substantially higher during
the rainy season in the southern region, which produces around 90% of the
country's palm fruit. This drags down the price of the fruit, forcing the
government to intervene to help support prices.

The Commerce Ministry also issued a benchmark price for palm fruit to ensure
farmers get appropriate prices and to prevent profiteers from buying them at
lower market prices.

The benchmark price was set at 4.30 baht per kilogramme, pushing average
market prices to around 4.10 baht per kg, well above the low price of 2-3
baht per kg at the time palm fruit had previously flooded the market.

This helped keep the price of crude palm oil at around 23 baht per kg,
compared with 21 baht in Indonesia and Malaysia, where farmers can produce
at lower prices due to economies of scale.

In contrast, Thailand normally faces crude palm oil shortage during the dry
season in the South and needs to import around 30,000 tonnes a year from
Malaysia to tackle the shortage.

In the long term, the Thai government plans to increase the proportion of
palm-oil based biofuel in the diesel gradually from B7 to B10. But that
depends heavily on sustained palm production for some time.

State majority-owned Bangchak Corporation Plc (BCP) reacted promptly to the
government policy by planning to add crude oil stock by 50% to 30,000
tonnes.

President and chief executive Chaiwat Kovavisarach said the company has
acquired another 10,000 tonnes of crude palm oil, with its 30,000 tonnes of
current stock to be feedstock for its wholly-owned Bangchak Biofuel Co.

Biofuel Co produces 810,000 litres of biodiesel a day, which requires around
10,000 tonnes crude palm oil for production until the end of June.

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Link to Original Article:
http://www.bangkokpost.com/business/news/1272607/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com