THAILAND INDUSTRY OUTLOOK 2021-2023

BIODIESEL
May 2021
Aphinya Khanunthong
[email protected]
+662 296 2000 ext. 10262

Over the next three years, the biodiesel industry will enjoy improving business conditions thanks to an average annual increase
in domestic demand of 3.0-4.0%, which will then bring consumption to 5.3-5.7 million liters per day. This outlook is supported
by: (i) 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; (ii) 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; and (iii) 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 (i.e., 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 in electrical vehicles production. Because of this, future profits may come under threat.

 Overview
Biodiesel, or alternatively B100, is a fuel that can be produced from a Figure 1: World Biodiesel Production & Consumption
range of biological inputs including plant matter, animal fats, and
waste cooking oil. By using alcohol-based chemical processing, these billion liters
Production Consumption
raw materials are converted into ethyl ester or methyl ester, which 50
have properties similar to regular mineral diesel. Biodiesel can then 40
be mixed with the latter, saving on the import of some oil products 30
and, thanks to this, biodiesel production provides the country with a
20
means of achieving a greater degree of security over its energy
supplies. 10
0
Globally, both demand and production of biodiesel have been

2017
2010
2011
2012
2013
2014
2015
2016

2018
2019
2020E
increasing steadily, and between 2010 and 2020, world consumption
rose from 19.8 to 49.4 billion liters (or average growth of 11% per
Source: OECD-FAO Agricultural Outlook 2020-2029
year) (Figure 1), with biodiesel now widely used in Europe, the United
States, Canada, Latin America, Australia, Japan, and some other Asian
countries. At the same time, production rose at a slightly slower
though still rapid annual rate of 10%, output jumping from 21.0 to
48.3 billion liters over the same period. The United States, Indonesia
Figure 2: Major Biodiesel Producers
and Brazil are the world’s largest producers (Figure 2), with this (2019)
biodiesel typically produced from rape seed, sunflower, coconut, soy
bean, oil palm and jatropha. As for Thailand, the country currently sits USA
Indonesia
in 5th place in the global production rankings, with its biodiesel
Brazil
manufacturers generally using crude palm oil as their primary input. Argentina
The production of biodiesel for mixing with standard diesel began in Thailand
Thailand in 2007, although at first, this was restricted to a 2-3% mix Malaysia
China
(or B2). This then increased to 5% (B5) in 2011, 7% (B7) in 2014 and
Korea
10% (B10) in 2019 (Figure 3). Naturally, this steady increase in the Colombia
proportion of biodiesel mixed in standard diesel has fed a rise in UK billion liters
demand for biodiesel overall, but the government has adapted the
0 2 4 6 8 10
mix to the quantity of oil palm available on the domestic market and
when there have been shortages, the mix has been reduced. Thus, in Source: OECD-FAO Agricultural Outlook 2020-2029
2016, the mix was cut from 7% to 5% in July and then again to 3% in
August as the market tightened and the government tried to maintain
stability and prevent a shortage of palm oil, but as supply improved,
the mix was increased again, rising to 5% in November of the same
year. Thai biodiesel production is almost entirely consumed
domestically, while imports of biodiesel need to be approved by the
Department of Energy Business.
Krungsri Research 1
 Thailand Industry Outlook 2021-23 Biodiesel

Figure 3: History of Biodiesel Blend in Thailand

B2 B2 B5 B3.5-B7 B7 B7, B20, B10**

2008 2010 March 2011 May 2011 2012 2014 2015 2016 May 2017 July 2018 2019 2020

B3 B3-B5 B7 B3-B5 B7, B20* B7, B10, B20

Optional Mandated in order to be appropriate for
the domestic supply of crude palm oil

Source: Department of Energy Business (DOEB), Compiled by Krungsri Research

Note: * On July 2, 2018, B20 is used in large trucks and public buses which are compatible with this type of fuel to be able to absorb a surplus of crude palm oil.
** DOEB announced a pilot program for the distribution of B10 beginning in June 2019, and from January 1, 2020, B10 has replaced B7 as the standard diesel mix.

Government support for the industry is laid out in the Alternative Energy Development Plan, or AEDP, and this is extremely
important in determining how the biodiesel sector develops, particularly with regard to ensuring that the domestic supply of
oil palm is sufficient to cover demand from the industry and that investment is promoted. The sector has thus been the
recipient of investment support policies carried out under the auspices of the Board of Investment (BOI), and for investors in
biodiesel production, this has included an 8-year exemption from corporate income tax, a 5-year 50% reduction in tax on
profits, and the waiving of import duties for machinery used in biodiesel production.
In Thailand, biodiesel is mostly produced from crude palm oil (CPO), although Thai manufacturers also use refined bleached
and deodorized palm oil (RBDPO), palm stearin and other vegetable oils (Figure 4). In 2020, a total of 5.9 million rai was given
over to oil palm production, and this yielded 16.2 million tonnes of raw oil palm, which in turn produced 2.9 million tonnes of
CPO. Of this, 1.4 million tonnes, or 48% of all national production of CPO, was directed to biodiesel refiners, with the rest
going to household consumption.
The relatively low number of players active in the industry means that the biodiesel market is not affected by high levels of
competition, and as of December 2020, there were only 13 biodiesel producers registered with the Department of Energy
Business, the majority of which are downstream companies that are part of commercial groups active in growing palm oil, oil
refining or petrochemicals. These have a combined production capacity of 8.5 million liters per day, up from 8.3 million liters
per day in 2019. In order of capacity, the most important players are Patum Vegetable Oil, Global Green Chemicals, New
Biodiesel, Bangchak Biofuel, and Energy Absolute (Table 1). Their output is consumed primarily by the domestic market, while
community-level small-scale biodiesel production1/ is mostly used by the agricultural sector in the north, northeast and south
of the country.

For manufacturers, the largest share of production costs Table 1: Biodiesel Producers in Thailand
goes to raw materials, in this case usually CPO, which (December 2020)
accounts for some 70% of the total. Chemical inputs run to Company
Capacity
another 20%, and the remaining 10% goes to operating costs. (liter/day)

As set out in the 2000 Fuel Trade Act, the domestic price of 1 Patum Vegetable Oil 1,800,000

pure biodiesel is determined by the Committee on Energy 2 Global Green Chemicals 1,722,242

Policy Administration, and this is used as the reference price2/ 3 New Biodiesel 1,000,000

in trade by distributors and refineries. 4 Bangchak Biofuel * 1,000,000

5 Energy Absolute ** 650,000
Operators’ profits are determined by two major factors: (i) 6 PPP Green Complex 630,000
government policy towards alternative energy3/ and the 7 AI Energy 600,000
setting of a biodiesel mix that matches demand with the 8 Suksomboon Energy * 450,000
supply of raw materials4/, and (ii) the difference between the 9 GI Green Power 200,000
sale price and the cost of inputs. (Oil refineries and traders 10 Verasuwan 200,000
may have a stronger negotiating position than biodiesel 11 Global Bio Power 150,000
producers and so they may be able to set purchase prices at a 12 Trang Palm Oil 100,000
level that diverges from the reference price.) 13 Bio Synergy 30,000
Total 8,532,242
1/ There are over 70 such community production centers across the country. The majority Source: Department of Alternative Energy Development and Efficiency (DEDE)
of these are teaching centers or organizations that promote the production and use of Note: * Expand production capacity, ** Reduce production capacity
biodiesel by local communities.
2/ The regulations for specifying the biodiesel price reflect the real costs of production by
considering the costs of 3 main inputs: crude palm oil (CPO), refined bleached and
deodorized palm oil (RBDPO), and palm stearin.
3/ The Alternative Energy Development Plan (2018-2037), or AEDP 2018.
4/ The Department of Energy Business is responsible for setting the proportion of
biodiesel in the diesel mix in line with the amount of palm oil available after household
consumption has been taken into account. Krungsri Research 2
 Thailand Industry Outlook 2021-23 Biodiesel

Figure 4: Biodiesel Supply Chain

 Situation Figure 5: Domestic Biodiesel Production

and Capacity Utilization
The Thai biodiesel industry has seen steady growth over the million liters/day %
recent past thanks to stronger demand driven by growth in 5.0 100
the economy and an increase in the size of the national 4.0 80
diesel-powered vehicle fleet. In addition, the market has been 3.0 60
boosted by the Alternative Energy Development Plan, which
2.0 40
has sought to increase the use of alternative energy as a way
of both supporting the price of palm oil and increasing 1.0 20
national energy security. As such, daily biodiesel consumption 0.0 0
has risen from 1.72 million liters in 2011 to 4.25 million liters 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
in 2018 (or 6.7% of all high-speed diesel), an average annual B100 Production Capacity utilization (RHS)
rise of 13.8%. Over the same period, output has risen at a
Source: DEDE, DOEB
slightly higher rate of 14.1% per year, jumping from 1.73 to
4.34 million liters per day (Figure 5).
Figure 6: Biodiesel (B100) Consumption (average)
Steadily falling prices for palm oil in 2019 encouraged the
million liters/day
government to increase the proportion of biodiesel in the
5.1
diesel mix as they tried to support producers. From October 4.9
2019, the government thus incentivized greater consumption 4.3
3.8
of B10 and, for large commercial vehicles, B20 by cutting 3.4 3.4
2.9 2.9
pump prices for these by respectively THB 2 and THB 3 below 2.4
the price of B7 (standard diesel). As a result, consumption of 1.7
biodiesel jumped 15.3% to 4.9 million liters per day (or 7.6%
of all diesel consumed nationally), while its average price
slipped to a 10-year low of THB 25/liter.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
In 2020, the outbreak of COVID-19 undercut demand as Source: DEDE
travel slowed and the economy slipped into a severe
recession (GDP fell 6.1%), while the continuation of the Figure 7: Diesel B20 Consumption (average)
severe drought into the first half of the year also eroded million liters/day
demand for the transport of agricultural goods. Nevertheless, 10.0
demand for biodiesel (B100) still rose, climbing to 5.1 million
8.0
liters per day, or growth of 4.3% from 2019 (though this was a
sharp fall on average annual growth of 11.3% over the 6.0
previous 5 years) (Figure 6). Overall, biodiesel now accounts 4.0
for 8.1% of the 63.5 million liters of high-speed diesel
2.0
consumed nationally each day. Factors supporting a
continuing rise in demand include the following: 0.0
Dec-20
Jul-19

Jul-20
Oct-19

Oct-20
Apr-19

Apr-20
Jan-19

Jan-20

Source: DOEB

Krungsri Research 3
 Thailand Industry Outlook 2021-23 Biodiesel

(1) The government’s decision to soak up excess supply of Figure 8: B7, B10, and B20 Consumption (average)
raw oil palm products by steadily raising the proportion of
biodiesel in the diesel mix has helped to underpin stronger million liters/day B7 B10 B20
demand. 70
Thus, B10 has now replaced B7 as the standard diesel mix 60
(from January 2020), with the latter now being used only in 50
older vehicles and some European models that are unable to 40
run on B10. The government has also set B20 as the preferred 30
20
choice for larger commercial vehicles and is now attempting
10
to ensure that B10 is easily available on forecourts
0
nationwide. The government has also been using price

Jul-19

Jul-20
Oct-19

Apr-20

Oct-20
Apr-19
Jan-19

Jan-20
mechanisms to influence the market, and price support for
B10 and B20 rose from the start of the year from respectively
Source: DOEB
THB 2.0 and THB 3.9 per liter to THB 2.5 and THB 4.25/. Note: B7 includes B7 Premium Diesel
Because of this, pump prices for B10 and B20 were THB 3.0
and THB 3.5 per liter below those of B7. For all of 2020,
consumption of B20 averaged 3.5 million liters/day (5.5% of
all high-speed diesel consumed nationally), down 21.9%
from 2019 (Figure 7). For B7, consumption averaged 43.8 Figure 9: Domestic H-Diesel* Usage (average)
million liters/day (69.0% of all diesel), down 26.8%, while
for B10, daily consumption came in at 16.2 million liters million liters/day
64.4
(25.5%, up from just 0.2% in 2019) (Figure 8). 65 63.3 63.5
62.2
(2) The number of diesel-powered vehicles registered in 60.7
60 58.5
Thailand is also rising, and in 2020, this increased 3.2% to 56.3
11.7 million. This is driven partly by an increasing desire to
55
use private rather than public transport and partly by strong
growth in the e-commerce sector, which is feeding into 50
greater demand for delivery services. Thus in 2020, vehicle
registrations were up 210,000 (+6.6%) for cars, 120,000 45
(+1.8%) for pick-ups, 20,000 (+2.5%) for large commercial 2014 2015 2016 2017 2018 2019 2020
vehicles, and 10,000 (+2.2%) for tractors, rollers and other
Source: DOEB
agricultural vehicles, but down 9,000 for buses (-6.9%). Note: * = B7, B10, B20, B7 Premium Diesel

The various factors described above combined to cut 2020

sales of high-speed diesel by 1.5% to an average of 63.5
million liters per day (Figure 9).
2020 output of biodiesel slipped 0.3% to an average of 5.0 Figure 10: Price and Spread
million liters per day on a fall in overall demand for diesel,
THB/kg
though this decline was strongest during the lockdown in
April. This drop occurred despite an additional 220,000 liters 50
per day of new capacity coming online, and this was one 40
factor behind the slump in capacity utilization, which
declined to a 3-year low of 59.0%. 30

In 2020, the reference price for sales of biodiesel to traders 20

rose 46.8% to THB 31.8 per liter or THB 36.7 per kilogram6/ 10 7.4 7.9 9.1 8.7 8.1 8.9 8.6 8.6 8.3 7.4 7.2 8.6
on a 57.9% jump in the price of CPO and of 58.6% in that of
palm stearin. These price rises were driven by the impact on 0
2019
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2020

oil palm yields of the drought that dragged into the first half
of the year, and by the increase in the standard diesel mix to
B10, which raised demand for CPO in the energy sector. At Spread B100 price CPO price

the same time, demand for CPO was further intensified by its
Source: Energy Policy and Planning Office (EPPO), Department of Internal Trade (DIT)
use in electricity generation and by the export of a further
300,000 tonnes. This then widened CPO-biodiesel spreads by
19.4% to THB 8.6 per kilogram (Figure 10).

5/ With effect from March 23, 2020.

6/ Calculated on the basis that 1,000 liters weighs 0.865 tonnes
Krungsri Research 4
 Thailand Industry Outlook 2021-23 Biodiesel

 Outlook
Krungsri Research sees demand for biodiesel rising by an Figure 11: Biodiesel Demand
average of 3.0-4.0% per year over the period 2021-2023
(Figure 11) to 5.3-5.7 million liters per day. This outlook will million liters/day
5.5 5.7
be supported by the following factors: 6.0 5.1 5.3
4.9
5.0 4.3
 Demand for diesel in the transport sector will tend to 3.8
strengthen on: (i) recovery in the Thai economy and 4.0 3.4 3.4
2.9
forecast annual growth of 3.0%; (ii) expansion in Thai 3.0
e-commerce that e-Conomy SEA 2020 predicts will lift 2.0
the value of the market from USD 9bn in 2020 to USD 1.0
24bn in 2025 (average growth of 21.0% per year) and
0.0
that will drive stronger demand for commercial delivery

2017
2014

2015

2016

2018

2019

2020

2021F

2022F

2023F
services, and especially for the use of pick-up trucks;
and (iii) an average annual 3.0-4.0% expansion in the
Source: DEDE, DOEB, Forecast by Krungsri Research
number of diesel vehicles registered in Thailand
 Government 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 Figure 12: Biodiesel Capacity Utilization
domestic supply of palm oil. The latter will be driven by %

the government’s efforts to increase the total area of oil 70

palm plantations from 5.9 million rai in 2020 to 10
65
million rai by 2029 and to lift daily CPO production to
around 3.0-3.2 million liters, which should then help to 60
keep the cost of inputs relatively flat for biodiesel
producers. These moves to increase domestic 55
consumption of biodiesel are also in step with those of
other regional governments: in Malaysia, B20 should 50
2014

2015

2016

2017

2018

2019

2020

2021F

2022F

2023F
replace B10 as the standard diesel mix in December this
year, while in Indonesia, B40 should replace B30 as the
standard mix in 2022. Source: DEDE, DOEB, Forecast by Krungsri Research
Note: 2016 new production capacity contributed by new players.
 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, pick-ups, SUVs and trucks. At present, Isuzu
and Toyota control 80% of the market for pick-ups that
can run on B20.

Table 2: Goals/potential for producing biodiesel from palm oil, as laid out in AEDP 2018 (2018-2037)

Maximum possible output 2018-2022 2023-2027 2028-2032 2033-2037

CPO used to produce biodiesel (million tonnes/year) 1.55-2.36 2.45-3.07 3.10-3.12 3.32-3.48

Biodiesel (million liters/day) 4.88-7.44 7.72-9.67 9.77-9.83 10.46-10.96

Biofuel Maximum target output (million liters/day)

Ethanol 7.5

Biodiesel 8.0

Other 0.5

Source: AEDP 2018 by Ministry of Energy

Krungsri Research 5
 Thailand Industry Outlook 2021-23 Biodiesel

Krungsri Research forecasts domestic demand for high-speed diesel7/ rising by an average of 2.0-3.0% per year over 2021-
2023. Over the next 3 years, demand for B7 will drop to 28.0-30.0 million liters per day from 2020’s daily demand of 43.8
million liters, while for B10, consumption will rise from 16.2 to 32.0-38.0 million liters 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% biodiesel by 2037. Krungsri Research thus expects that demand for biodiesel will continue to rise, and in response,
manufacturers will expand their production capacity. Overall, capacity utilization is therefore forecast to rise only slightly,
edging up to around 60.0-62.0% from its 2020 level of 59.0% (Figure 12).

Despite the generally positive outlook for the next few years, challenges remain for the industry. (i) 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. (ii) It will also be necessary to increase consumer confidence in the use of biodiesel since different
diesel engines have different capabilities with regard to using higher biodiesel mixes, and therefore, owners will need to have
clear information about whether or not it is safe to use B10 or B20 in their particular vehicle. 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
30% of auto output being of electric vehicles by 2030 (as of 2020, electric vehicles accounted for only 3.5% of all new vehicle
registrations), and it is expected that as soon as 2025, the purchase price of new electric cars will 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.

 Krungsri Research’s view: Over the 3 years from 2021 to 2023, demand for biodiesel will continue to rise. This
will be lifted by stronger economic recovery, growth in online retail, and government support for palm growers and
processors that will encourage greater consumption of biodiesel in the diesel mix. However, this same desire to support
the agricultural sector may lead the government to interfere with palm oil prices and this, together with possible
shortages in the supply of CPO, may adversely affect the industry and reduce future profitability.

7/ Includes B7, B10, B20 and other types of premium diesel.

Krungsri Research 6
KRUNGSRI RESEARCH

Somprawin Manprasert, Ph.D. Head of Research Division and Chief Economist

Phornphan Phoksuphat Head of Macroeconomic and Industry Research

Macroeconomic Team
 Sujit Chaivichayachat Head of Macroeconomic Research
 Chamadanai Marknual, Ph.D. Senior Economist
 Churailuk Pholsri Senior Economist (Forecasting)
 Soison Lohsuwannakul Senior Economist (Regional Economy)
 Sathit Talaengsatya Senior Economist (Regional Economy)
 Kusalin Charuchart Economist

Industry Team
 Sarun Sunansathaporn Head of Industry Research
 Taned Mahattanalai Senior Analyst (Digital)
 Poonsuk Ninkitsaranont Senior Analyst (Healthcare, Mobile Operators)
 Piyanuch Sathapongpakdee Senior Analyst (Transport & Logistics)
 Narin Tunpaiboon Senior Analyst (Power Generation, Modern Trade, Chemicals, Medical Devices)
 Puttachard Lunkam Analyst (Hotels, Construction Contractors, Construction Materials, Industrial Estate)
 Patchara Klinchuanchun Analyst (Real Estate)
 Wanna Yongpisanphob Analyst (Automobile, Electronics & Electrical Appliances, Food & Beverages)
 Chaiwat Sowcharoensuk Analyst (Agriculture)
 Aphinya Khanunthong Analyst (Energy, Petrochemicals)

Intelligence Team
 Pimnara Hirankasi, Ph.D. Head of Intelligence Team
 Punjaphut Prasitdechsakul Senior Analyst
 Rachot Leingchan Analyst
 Arpakorn Nopparattayaporn Analyst
 Chutipha Klungjaturavet Analyst

MIS and Reporting Team

 Suratchanee Somprasong Administrator
 Thamon Sernsuksakul Administrator
 Chirdsak Srichaiton MIS Officer
 Wongsagon Keawuttung MIS Officer

For research subscription, contact [email protected]

Disclaimer
All material presented in this report, unless specifically indicated otherwise, is under copyright to Krungsri Research. None of the material, nor its content, nor any
copy of it, may be altered in anyway, or copied to any other party, without the prior express written permission of Krungsri Research. This document is based on
public information believed to be reliable. Nevertheless, Krungsri Research would not affirm the accuracy and completeness of this information. We accept no
liability whatsoever for any direct or consequential loss arising from any use of this document or its content. Information, opinions and estimates contained in this
report are our own, which are not necessarily the opinions of Bank of Ayudhya Public Company Limited and its affiliates. It reflects a judgment at its original date
of publication by Krungsri Research and are subject to change without notice.

Krungsri Research 7