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Drewry: EU’s Palm-Based Biodiesel Ban to Hit Chemical Tankers Demand

A recently announced EU ban on the use of palm-based biofuels will affect the demand for chemical tankers, according to shipping consultancy Drewry.

In January 2018 the EU voted to ban the use of palm-based biofuels by 2020. Malaysia and Indonesia, the world’s largest palm oil producers, protested against this decision and in June 2018 the EU decided not to terminate policy support to biodiesel after 2020, but gradually to phase out support to high emitting biofuels by 2030.

In the revised agreement, palm oil will remain in use at the 2019 level until 2023, after which it will be phased out by 2030. The decision would lead to a decline in palm oil consumption in Europe, and subsequently result in a drop in volume of palm oil trade on the Southeast Asia-Europe route from 2019.

“Being a long-haul trade, this will have a detrimental impact on the demand for chemical tankers,” Drewry said.

During the period from 2013 to 2018 the overall volume of biodiesel carried by chemical tankers grew at a CAGR of 7.9% and is forecast to expand 1.8% in 2019. The tonne-mile demand went up by a high 38% in 2018, reflecting strong growth in long-haul trades with the EU being the key market for plant-based biodiesel.

In 2018, Indonesia produced 45-47 million tonnes of palm oil, of which 28.9 million tonnes was exported. For Malaysia, palm oil production in the same period was 16.5 million tonnes and exports were 15.2 million tonnes. The EU is a key market for both exporters and in 2018 Indonesia supplied 25% and Malaysia 28% of total EU palm oil imports (4 million tonnes).

“With the palm oil phase out, Europe will see both a change in the source of biodiesel imports and the feedstock used to produce biodiesel. Already, the EU is increasingly turning to imports from China, where UCO is a key feedstock. In fact, China‚Äôs biodiesel exports to the EU surged more than 70% to reach 311,000 tonnes during the first eight months of 2019. At the same time the EU is also importing more UCO from other countries in Asia such as Japan,” Drewry explained.

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