The study said there would be stronger demand for diesel from the transport sector, which will be driven by:
▪︎a rebound in economic activity, ever-greater e-commerce sales and a steady rise in the number of diesel-powered vehicles on Thai roads.
▪︎Government efforts to rebalance the palm oil market, together with the increase in the total area of oil palm under cultivation and the resulting growth in supply;
▪︎The move by auto manufacturers to put greater efforts into developing diesel engines that can run on fuels that have a high biodiesel content.
Despite the generally positive outlook, challenges will remain for the industry, including uncertainty over security of supply of inputs (of palm oil), the possibility that government intervention in the market to help palm growers may affect the price of inputs, and the government support for electrical vehicles production, the study said. Because of this, future profits may come under threat.
Krungsri Research sees demand for biodiesel rising by an average of 3-4 per cent per year over 2021-23 to 5.3 million to 5.7 million litres per day. Demand for diesel in the transport sector will tend to strengthen on:
▪︎recovery in the Thai economy and forecast annual growth of 3 per cent;
▪︎expansion in Thai e-commerce that e-Conomy SEA 2020 predicts will lift the value of the market from US$9 billion in 2020 to US$24 billion in 2025 (average growth of 21 per cent per year) and that will drive stronger demand for commercial delivery services, and especially for the use of pickup trucks; and
▪︎an average annual 3-4 per cent expansion in the number of diesel vehicles registered in Thailand.
The government's efforts to balance the market for palm oil are also feeding stronger demand for biodiesel, most notably with the 2020 switch from B7 to B10 as the standard diesel mix, though this will likely rise again in the future in line with an anticipated expansion in the domestic supply of palm oil, the study said. The latter will be driven by the government’s efforts to increase the total area of oil palm plantations from 5.9 million rai (944,000 hectares) in 2020 to 10 million rai by 2029 and to lift daily CPO production to around 3 million to 3.2 million litres, which should then help to keep the cost of inputs relatively flat for biodiesel producers.
These moves to increase domestic consumption of biodiesel are also in step with those of other regional governments: in Malaysia, B20 should replace B10 as the standard diesel mix in December this year, while in Indonesia, B40 should replace B30 as the standard mix in 2022.
Auto manufacturers are developing new engines that are capable of running on diesel mixes with a higher biodiesel content, and these will be available for large vehicles, pickups, SUVs and trucks. At present, Isuzu and Toyota control 80 per cent of the market for pickups that can run on B20.
Krungsri Research forecasts domestic demand for high-speed diesel rising by an average of 2-3 per cent per year over 2021-23.
Over the next three years, demand for B7 will drop to 28 million to 30 million litres per day from 2020’s daily demand of 43.8 million litres, while B10 consumption will rise from 16.2 million to 32-38 million litres per day. However, demand for B20 will remain relatively weak since its price is similar to that of B7 and B10, a result of the government’s decision to relieve pressure on the Oil Fund by cutting price support for B20, and consumer fears that using B20 may have long-term effects on their vehicles and/or require them being retuned or fitted with additional equipment. Nevertheless, the government still plans to raise the standard mix above B10 when the conditions are right, and officials have a long-term plan to increase the diesel mix to 23 per cent biodiesel by 2037.
Krungsri Research expects demand for biodiesel will continue to rise, and in response, manufacturers will expand their production capacity.
Overall, capacity utilisation is therefore forecast to rise only slightly, edging up to around 60-62 per cent from its 2020 level of 59 per cent.
Despite the generally positive outlook for the next few years, challenges remain for the industry. Players will need to manage their production costs carefully since there is a possibility of periodic shortages of CPO, which would then tend to push up operating costs, the study said.
Over the long term, the increasing interest in electric vehicles also poses a threat to the industry.
At present, the Department of Energy aims to have electric vehicles make up 30 per cent of auto output by 2030. As of 2020, electric vehicles accounted for only 3.5 per cent of all new vehicle registrations.
It is expected that as soon as 2025, the purchase price of new electric cars would be equivalent to that of traditional internal combustion engine-powered autos.
Given this outlook, demand for oil, including biodiesel, is likely to come under threat in the future.
Published : Jul 02, 2022
Published : May 23, 2021
By : The Nation