Asean’s Biodiesel Push Fuels Palm Oil Rally, but Will SGX-Listed Players Gain?

May 05, 2026

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by Benicia Tan (Business Times) ... A crude oil supply shortfall from the prolonged closure of the Strait of Hormuz has accelerated biodiesel mandates in South-east Asia, driving up crude palm oil (CPO) prices and lifting Singapore Exchange-listed plantation stocks.

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Following the US-Iran war, CPO’s premium to gas oil has narrowed to around US$14 a tonne, from an average of around US$271 a tonne over the past year.

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In Indonesia, the price of B50 – the blend of 50 per cent palm oil-based fuel with diesel – is now around 13,000 rupiah (S$0.96) a litre, compared to diesel at 17,800 rupiah a litre.

The country’s biodiesel mandate has scaled from B20 in 2016 to B40 in 2025. Although Indonesia’s B50 mandate was postponed in early 2026 due to capacity constraints, the government has accelerated its roll-out to Jul 1, subject to the completion of technical tests and infrastructure readiness.

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Meanwhile, Malaysia announced in mid-April that it would gradually raise its biodiesel mandate from B10 to B15. This comes as the country aims to reduce reliance on imported fossil fuels and safeguard its domestic diesel supply.

Similarly, Thailand’s government has implemented a subsidy for B20, keeping it cheaper than unblended diesel.

Analysts expect CPO prices to be supported by a supply deficit amid the Middle East conflict and the prospect of El Nino, which could curb rainfall in South-east Asia.

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“Higher CPO prices are supportive of upstream plantation earnings in the near term, but could be a double-edged sword for downstream businesses,” they said.

For integrated players such as Wilmar : F34 +3.05% and Golden Agri-Resources : E5H +3.17%, higher upstream contributions may be “partly offset” by elevated input costs in downstream operations.

This is especially when price increases cannot be passed through quickly to consumers due to competition and the staple nature of food products, said the OCBC analysts.

And while higher CPO prices generally bode well for the top lines of upstream plantation players such as Bumitama Agri : P8Z +1.93% and First Resources : EB5 +2.29%, Lim and Chu said these companies could also face margin pressure if a prolonged disruption to trade routes causes input costs, such as that for fertiliser, to spike.

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While CPO prices are supported by accelerating biodiesel mandates and weather-driven supply constraints, analysts noted that infrastructure gaps remain a key bottleneck.

If the B50 mandate is fully implemented in Indonesia, an estimated 2.1 million kilolitres of methanol will be required annually, noted CGS International analysts.

To reduce its reliance on methanol imports, Indonesia’s Ministry of Energy and Mineral Resources is exploring domestic methanol production sites in East Java and Sumatra, said the analysts.

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BMI added: “Unlike Indonesia, Malaysia has shown no intention to prioritise domestic biofuel mandates over export revenue.”

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As palm oil’s role evolves from being a commodity to being a strategic energy asset, Tiruchelvam of Aletheia Capital noted: “The Gulf crisis may serve as a catalyst to bridge the disconnect between CPO prices and plantation equities.” READ MORE

Related articles

Asean’s next generation of biofuels needs resilience beyond blending (Eco-Business)
Malaysia to expand palm oil biodiesel blending to strengthen energy security (BioEnergy Times)
Palm surges more than 2pc on Indonesia biodiesel hopes (Business Recorder)

Excerpt from Eco-Business: Will scaling biofuels in Southeast Asia make the region more resilient to oil shocks, or does it introduce new vulnerabilities? Structural risks must be addressed as biofuels take a larger share of the transport fuel mix.

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Amid geopolitical turmoil, energy crises and supply shocks can trigger cost increases that spread quickly through the economy. Biofuels are therefore often viewed as a domestic buffer for the transport sector, helping reduce exposure to imported fossil fuels while keeping road mobility less vulnerable to supply shocks.

Road-transport biofuels stand out because they are deployable now, compatible with existing vehicles and fuel infrastructure, and offers a clear, near-term policy lever. Within Asean’s energy transition planning, including scenarios in the Asean Renewable Energy Long-term Roadmap (RE LTRM), biodiesel and bioethanol continue to play an important role while electric vehicle (EV) uptake remains uneven and relatively slow in many markets.

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Given the uncertainty around how quickly different transport technologies will scale across markets and segments, biodiesel and bioethanol continue to be treated as vital fuels in the pathway toward carbon neutrality.

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What first-generation biofuels got right

First-generation biofuels have brought tangible gains. Blending mandates for biodiesel and bioethanol have replaced part of the diesel and gasoline that would otherwise be imported. They have diversified the fuel mix, supported local processing industries, and created income opportunities across parts of the agricultural value chain. These benefits explain why governments continue to expand blending targets.

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The irony is that the very problem biofuels are meant to hedge, oil price volatility, can still spill over into biofuels through oil-linked inputs and logistics.

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As the diagram shows, oil price volatility can raise first-generation biofuel production costs because key inputs such as fertiliser, processing energy and logistics remain oil-linked.

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As mandates expand, feedstock expansion pressure increases and triggers greater scrutiny over land-use and credibility. Scrutiny raises compliance burden and pushback on biofuel actors, which adds further pressure on policy and public finances.

The exit from this challenge is conditional. If sustainability scrutiny is addressed through credible lifecycle accounting and monitoring, reporting and verification (MRV), biofuels can access performance-based incentives such as carbon market revenues or tradable renewable attributes based on carbon intensity, similar to Brazil’s RenovaBio. This creates additional revenue streams that reduce reliance on blanket subsidies.

In this sense, sustainability governance is not only an environmental requirement. It is also a lever to relieve fiscal pressure and break the subsidy loop that has long constrained biofuel development.

Redesign affordability support, build credible governance

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A first priority is to redesign affordability support so it strengthens durability rather than deepening fiscal exposure.

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A second priority is to treat sustainability governance as an enabler of better policy instruments, not only a compliance requirement. Credible lifecycle accounting and MRV also changes what governments can do. Instead of supporting biofuels simply because volumes are produced, policymakers can tie support to demonstrated performance, such as lower emissions intensity and better process efficiency.

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The point is not to set aside first-generation blends overnight, but to recognise that long-term scale will depend on whether biofuels can grow without becoming either too costly to sustain or too difficult to justify. Second-generation options, particularly those using wastes and residues, can strengthen the credibility of emissions reductions and reduce some of the land-use concerns that follow first-generation expansion.

The practical challenge is in bankability of these second generation biofuels production. In order to increase the investment and bankability of such projects, they will need reliable feedstock supply chains for wastes and residues, clear standards, credible offtake arrangements, and financing structures that reduce early-stage risk. But bankability will not improve through project-by-project fixes alone. READ MORE

Excerpt from Business Recorder: Malaysian palm oil futures climbed more than 2 percent on Tuesday (June 16, 2026), ahead of a public holiday, snapping two straight sessions of losses, as Indonesia’s looming B50 biodiesel programme implementation lifted the market.

The benchmark palm oil contract for September delivery was up 93 ringgit, or 2.07 percent, on the Bursa Malaysia Derivatives Exchange at 4,578 ringgit (USD1,126) a metric ton at the close.

The Bursa Malaysia Derivatives Exchange will be closed on Wednesday for a public holiday.

The potential rollout of the B50 biodiesel programme in Indonesia is supporting near-term sentiment, while overnight strength in soybean oil prices further supported the market, said David Ng, a proprietary trader at Kuala Lumpur-based trading firm Iceberg X Sdn Bhd. Indonesia will begin implementing its ethanol-blended gasoline alongside a higher 50 percent biodiesel mandate from July 1. READ MORE