Asian plantation sector booms on Indonesia-Malaysia biofuel plan
We keep tracking Indonesia and Malaysia's joint plan to each set aside 6 million tons of Crude Palm Oil (CPO) per year for biofuels and to expand Indonesia's biofuel plantation acreage by 6 million hectares (roughly two times the size of Belgium or two times the state of Massachussets).
Obviously setting aside 12 million tons of CPO from a total world annual production of 32.3 million tons (this is 40%), will have a huge impact on this market. The question is, will the expansion of the plantation area keep pace with the switch to biofuels?
Asia's largest investment bank, CIMB Securities says in a report that only half of the six million hectares allocated will be used for oil palm, whereas the remainder will be used to produce cassava, castor (or jatropha) and coconut.
The research unit adds though that Indonesia could well be on its way to meeting the six million-tonne inventory target for CPO should the three million hectares yield two tonnes per hectare - which is very likely. This should prevent a potential shortage of CPO that would arise from higher biofuel demand over time. However, CIMB Securities also said the same yield rate could also lead to an over-supply should the Indonesian government’s biofuel projects fail to take off. It said the Indonesian commitment to provide the land was seen as "favourable" for Malaysian planters since Malaysian land was becoming increasingly limited. There were also incentives that could be potentially attractive to Malaysian investors.
CIMB Securities, upbeat and "overweight" on the plantation sector over the next two years due to favourable structural changes for CPO demand, continued to favour Kuala Lumpur Kepong Bhd (KLK), Asiatic Development Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd as its top picks.
Meanwhile, another research unit said the plantation sector, despite its positive attributes, should not be trading at a premium to the rest of the market, and that biofuel was viable at the CPO price of RM1,700 per tonne only if current crude oil stayed at around US$70 to 75 per barrel. If oil prices trend downwards, so will CPO prices. Both are now thoroughly linked [see table].
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: palm oil :: sustainability :: Asia ::
Obviously setting aside 12 million tons of CPO from a total world annual production of 32.3 million tons (this is 40%), will have a huge impact on this market. The question is, will the expansion of the plantation area keep pace with the switch to biofuels?
Asia's largest investment bank, CIMB Securities says in a report that only half of the six million hectares allocated will be used for oil palm, whereas the remainder will be used to produce cassava, castor (or jatropha) and coconut.
The research unit adds though that Indonesia could well be on its way to meeting the six million-tonne inventory target for CPO should the three million hectares yield two tonnes per hectare - which is very likely. This should prevent a potential shortage of CPO that would arise from higher biofuel demand over time. However, CIMB Securities also said the same yield rate could also lead to an over-supply should the Indonesian government’s biofuel projects fail to take off. It said the Indonesian commitment to provide the land was seen as "favourable" for Malaysian planters since Malaysian land was becoming increasingly limited. There were also incentives that could be potentially attractive to Malaysian investors.
CIMB Securities, upbeat and "overweight" on the plantation sector over the next two years due to favourable structural changes for CPO demand, continued to favour Kuala Lumpur Kepong Bhd (KLK), Asiatic Development Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd as its top picks.
Meanwhile, another research unit said the plantation sector, despite its positive attributes, should not be trading at a premium to the rest of the market, and that biofuel was viable at the CPO price of RM1,700 per tonne only if current crude oil stayed at around US$70 to 75 per barrel. If oil prices trend downwards, so will CPO prices. Both are now thoroughly linked [see table].
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: palm oil :: sustainability :: Asia ::
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