Biofuel Makers Upbeat About Rl-China Cooperation

Local businesess are throwing their support behind the governments potential cooperation with China in supporting the latters goal to boost the domestic use of biodiesel amid negative sentiment about Indonesian biodiesel products in Europe and the United States.

During his visit to China on the weekend. President Joko “Jokowi” Widodo announced Indonesias commitment to supply more crude palm oil (CPO) to help China meet its 5 percent biodiesel blending target – a move that was welcomed by Chinese President Xi Jinping.

At the same time, President Jokowi also imited China to invest in Indonesias downstream businesses, which are set to use 40 million tons of CPO by 2020.

“We are ready to cooperate with China, whether by supplying the CPO, biodiesel or even the technology needed. Moreover, well be happy if they want to invest their money here or even vice versa,” Indonesian Biofuel Producers Association (Aprobi) chairman Paulus Tjakrawan told The Jakarta Post on Tuesday.

“China is committed to moving toward a cleaner energy future. Hence, we will seek the opportunities to team up with them.”

Last year, Indonesia shipped 5.28 million tons of CPO overseas, with the majority going to India, data from the Geneva-based International Trade Center show. Other major destinations were the Netherlands, Singapore, Italy, Spain and Germany.

China, meanwhile, bought a tiny fraction of Indonesias CPO exports last year, at only 14,000 tons.

China adopted a 10 percent ethanol blending (E10) policy in at least 11 provinces in 2016. In those mandated areas, state-owned petroleum companies are required to purchase and blend 10 percent fuel ethanol into gasoline from designated plants.

It has also maintained over the past seven years a trial program requiring a biodiesel-diesel blending ratio of 2 to 5 percent in Hainan province.

Such policies are in line with Chinas long-term plan to reduce dependence on imported energy. Chinas 13 th Five-Year Plan (FYP), devised in October last year, states the countrys goal to produce 5 million tons of ethanol and 2 million tons of biodiesel by 2020.

Indonesian Vegetable Oil Refiners Association (GIMNI) executive director Sahat Sinaga said collaboration between Indonesia and China would benefit both parties, because Southeast Asias biggest economy had a large amount of idle capacity- in its biodiesel industry.

Indonesia currently has an annual production capacity of 10 million tons of biodiesel, while the utilization has reached less than 30 percent due to low domestic demand.

“So, if we can supply biodiesel to China, it is going to be a winwin solution for both countries,” Sahat said.

“Moreover, China will likely prefer to use palm oil, which is cheaper by around USS180 to $200 per ton than oil made from rapeseed, soybeans or sunflowers.”

CPO prices hovered between S655 and S717.5 per ton throughout April ?.fter staying between S685 and S750 per ton the previous month.

Meanwhile, Center of Reform on Economics (CORE) Indonesia research director Mohammad Faisal said Indonesia should make sure that there would be no tariff or non-tariff barriers that would make it hard to realize such cooperation with China.

Since mid-2015, the government has been charging levies of $50 per ton for CPO shipments and $30 for processed palm oil products to palm oil exporters, when CPO prices stand at below $750 a ton in a bid to help pay for biodiesel subsidies, replanting, research and development of oil palm farmers to boost their production.

Exports of palm oil products increased by 23.5 percent year-on-year to 8.02 million tons in the first quarter of this year, data from the Indonesia Association of Oil Palm Producers (GAPKI) show.

In the month of March, exports decreased by 5 percent to 2.53 million tons due to slowing global demand, especially from India and China.

At that time, palm oil exports to India and China accounted for 430,030 tons and 322,140 tons, respectively, down by 27 percent and 18 percent month-on-month.

Nonetheless, Sahat said that possible cooperation with China would prove that negative sentiment surrounding Indonesias biodiesel industry was baseless.

In March, the US commercial trade association National Biodiesel Board (NBB), along with dozens of biodiesel producers, filed a petition to the US Department of Commerce and the US International Trade Commission to impose anti-dumping and countervailing duties on imports of biodiesel from Argentina and Indonesia.

To make things worse, the European Union decided in early April to gradually reduce the use of vegetable oils, including palm oil, that were not sustainably produced in biodiesel production in a bid to reduce deforestation – a move that could harm Indonesia as one of the worlds largest producers of palm oil.

Fedina S. Sundaryani/ Viriya P. Singgih

Sumber: The Jakarta Post