Germany has ruled that biodiesel derived from soya and palm oils will be eliminated from its list of qualified biofuels

BIODIESEL producers in Malaysia will not be able to achieve the 200,000 tonnes export target because of a recent German ruling.

Germany is the world's biggest biodiesel producer and consumer. Since 2006, Malaysia has been shipping the bulk of its palm oil-based biodiesel to Germany.

Last week, the German government announced that biodiesel derived from soya and palm oils will be eliminated from its list of qualified biofuels.

Although the new rule will become law in early 2009, it will be backdated to September 26 2008.

In the first 10 months of this year, Malaysia exported 143,805 tonnes of palm biodiesel. While in the last six months, the price movements of crude oil and biodiesel allow for palm biodiesel to be produced profitably, demand has been lukewarm.

Vance Bioenergy Sdn Bhd managing director Long Tian Ching said the biodiesel market is highly influenced by government mandates and subsidies in consuming countries.

Another challenge that will further dampen demand for palm biodiesel is the coming winter months.

As the northern part of the globe prepares for winter, there would be less demand for palm biodiesel because it solidifies in cold temperature and therefore is not the preferred choice when pitted against rapeseed or soya-based biodiesel.

Those who had invested in additional facility to "winter-proof" the palm biodiesel like Lereno Sdn Bhd, however, can continue to ship out the fuel into the US, Europe or other cold climate nations.

Lereno Sdn Bhd technical director Dr Franco Longhini said: "We're running full flow and we have no problem in our shipment to Europe."

Lereno's 60,000 tonne-per-year biodiesel plant in Perak subjects its palm biodiesel to further distillation to change its chemical structure so that it remains fluid even below freezing temperature.

When contacted, Malaysian Biodiesel Association (MBA) said its members are preparing for the B5 mandate that will take place from February 2009.

B5 refers to a blend of five per cent palm biodiesel and 95 per cent regular diesel.