Malaysia’s biodiesel industry struggles despite high palm oil inventory

Malaysia recently mandated B5 (5% biodiesel) blending across the central states of Kuala Lumpur, Putrajaya, Negri Sembilan, Malacca and Selangor. According to industry sources, most of the country’s biodiesel plants have been temporarily shut down when prices of crude palm oil started to spike, making biodiesel production uneconomical. According to the Malaysian Palm Oil Board, the country’s palm oil production rose 13.7% in May to 1.74 million metric tons. Members of the country’s biodiesel industry blamed the lack of tax incentive in Malaysia, unlike Indonesia. Indonesian are incentivized to produce and export palm oil methyl esters (PME), which enjoys a lower export tax of 5%, compared to crude plam oil’s 17.5%, resulting in an effective discount of 12.5%. “The export tax is killing us,” said one Malaysian producer. (July 6, 2011)