The Trouble with Tallow (and Renewable Diesel?): Singapore & Globally

By Khor Yu Leng, yuleng@segi-enam.com & Claudia Nyon research@segi-enam.com 

Industry players have been agog at news from Argus reporting a pile up of tallow vessels outside Singapore shortly after production stoppage at Neste’s Singapore biorefinery slowed down purchases of tallow feedstock. Equipment failure around mid-October at the refinery put the production of renewable diesel to a standstill, as covered by us here

Three vessels have been pinpointed as carrying tallow and facing trouble offloading the commodity in Singapore: Stolt Renge, Stolt Sakura and Stolt Satsuki.  

We’ve tracked these vessels and our findings confirm this.

The Stolt Renge, which has a carrying capacity of 12,343 tonnes sailing under the flag of Singapore, has a current load condition of being in ballast (i.e., not carrying any cargo but containers filled with sea water to add weight). It departed from Port Klang and arrived in Singapore on 6 November, 9.15 a.m. Since late October, the Stolt Renge seems to have been shuttlingbetween Port Klang and Singapore. In early October, the Stolt Renge stationed itself in Singapore for 21 days. 

Another such ship similarly found itself stationed in Singapore for long periods of time in early October: the Stolt Sakura was stationed for 23 days before heading to Port Klang where it moved between the different anchorages within Port Klang for the next 12 days. As last checked, the Stolt Sakura is now stationed in Kuantan with a load condition of being in ballast. It has a carrying capacity of 12,817 tonnes sailing under the flag of Singapore.

Unlike the earlier ships, the Stolt Satsuki has found herself stationed in Singapore since 21 October since its arrival from Brisbane. It has a load condition of being laden with a carrying capacity of 12,342 tonnes sailing under the flag of Singapore.

The collective dates indicating inactivity in Singapore since early October coincides with reports in early October that Neste’s Singapore diesel line was taken offline after equipment failure following scheduled maintenance work. In early November, Neste reportedly also temporarily shut down its refinery in Rotterdam, Netherlands, following a fire. Neste subsequently lowered its full-year guidance for renewable products sales volumes. These delays reflect a broader supply chain issues.

Demand-side, soaring US biofuel demand is reshaping trade flows. In early November (as reported prior to the US election) significantly changed global trade flows of tallow in the past two years, boosting world trade to a new high of 2.5 Mn T in Oct/Sept 2023/24 (+24%). 

The story on tallow, as one of several diesel feedstocks, is just one facet of the broader narrative surrounding renewable diesel’s future. In the first four months of 2024, imported Brazilian tallow in the US for biofuel production surged by 377% compared to previous years, edging out US soybean farmers. From Jan to Sept 2024, reports came in that the US flooded its market with a record 3.9 billion pounds of imported UCO, up 98% year-on-year, 55% of which originated from China. 

Some experts suggest the volume of UCO imported by the US in 2024 was enough to replace the oil from more than 332 million bushels of soybeans (equivalent to Minnesota’s entire 2024 crop).Others counter that the demand for soy oil has consistently increased since food use has remained steady  since the mid-2000s after the FDA set rules on trans fat use in foods. They argue that imports are necessary to meet domestic demands for biomass-based diesel, be it feedstocks or finished products. 

Renewable diesel made from tallow and UCO has a lower carbon score than soybean oil and hence was eligible for higher tax credits in California, where a high proportion of US green diesel is consumed. 

However, with president-elect Donald Trump’s unannounced tariff plans, it remains possible that a blanket import tariff could close the door on imported (and cheaper) renewable diesel supplies. 

Coupled with Neste’s refinery disruptions, perhaps renewable biofuels in general are at risk? The Trump administration’s pick for the EPA administrator, Lee Zeldin, has already resulted in the biggest slump in soybean oil  since July 2024, as noticed by experts a few days ago. Experts typically zoom in on soybean oil as it tends to react first to any headlines related to the RFS. Historically, Lee Zeldin has consistently voted against the Renewable Fuel Standard (RFS) and soybean oil has been one of the main feedstocks used in biofuel production.

At Indonesia mining & palm oil events, and the Agri Malaysia showcase

Yu Leng attended Mining Indonesia 2024, which showcased heavy equipment, including giant tippers, and some (much smaller) electric models. 

Note: from internal analysis & presentations. For more information, please contact research@segi-enam.com.

Yu Leng also engaged in sustainable palm oil efforts in the region with recent visits in Jakarta and Sumatra. See our LinkedIn post (here) and further reflections:

At AgriMalaysia 2024. Demand for the yearly exhibition was observed by the presence of two halls as compared to one hall in previous years. Chinese suppliers were in greater attendance. Agricultural produce purchased included mushrooms and passionfruit. Discussions with Liew Yew Ann about palm oil, agronomy, mechanisation, and coconut farming prospects. The durian sector had plenty of supplies. Great effort by Yi Xuan Lai for Yara Malaysia's fertigation efforts. See our LinkedIn post (here) and further reflections:

Social media scan on palm oil @ 16 Oct 2024

Here’s a scan of some news and issues that have caught the attention of palm oil watchers, in the last three weeks! We mostly pick up on things on Twitter/X. Come here for more, https://x.com/khorreports

EUDR. A hot topic amongst regulators and market players, we have argued it would be a two year muddle-through. Maybe for three years, with the one year additional time? Alerts on X (1) and (2). There is positive feedback about enhanced regulations and traceability in the palm and rubber industries, including in Ivory Coast, Malaysia, and Thailand. The regulatory upgrades are being underestimated, while costs may be overestimated. Aida Greenbury praises how cocoa farmers in Ghana are preparing for the EU's Deforestation-Free Due Diligence regulations.

On prices and trade. Susan Stroud is a notable expert on soy from North America. A 25-year palm oil price chart from Malaysia's BMD is mentioned, and Indian buyers are canceling palm oil shipments due to a sharp duty hike and rising Malaysian prices. Alerts on X (1), (2), (3).

Malaysia’s palm oil consumption has dropped significantly. Diesel consumption in Malaysia is down due to subsidy reforms, but oleochemical exports may gain from Indonesia's export duty adjustments.

News on Indonesia. New data shows an increase in palm oil deforestation in Indonesia in 2022, with no data yet for 2023. The government's Food Estates program faced challenges, particularly in peat areas, due to difficult terrain and market issues. Indonesia's Food Estates project raises concerns about food inflation, with climate change, a weak rupiah, and high imported food prices posing potential risks.

News from India. India's palm oil yields are around 12 tonnes/hectare, lower than major producers like Malaysia and Indonesia. India's vegetable oil imports dropped 30% in September due to lower demand and high prices, following higher imports in July-August. 

Palm oil is used in the energy sector and in renewables. Gas oil and Brent crude are key factors for palm oil market watchers. An oil asset map from @SPGCI provides detailed insights into the Middle East. Energy, beyond food and personal care, is crucial for the palm oil sector. The rapid growth of renewables is important. By 2030, solar PV and wind are expected to double their share to 30% of the global power mix, meeting around half of global electricity demand. (Palm oil biomass should count in the dark green “other renewables” segment.) But there’s always a risk of being called out on greenwashing… The UK advertising watchdog ruled Virgin Atlantic’s “100% sustainable aviation fuel” ad misleading and instructed them to clarify the environmental impact in future ads (note: SAF is a technical term and it still contains fossil fuels). 

Catch up on interviews with BFM

By Claudia Nyon, Research Associate, research@segi-enam.com 

Here’s a belated update on two BFM interviews back in August.

Yu Leng was on BFM’s Morning Run on 26 August 2024 to provide her insights on the increase of rubber prices against the impending implementation of the European Union’s Deforestation Regulation (EUDR). Yu Leng also considered the present challenges of smallholder producers of palm oil and rubber. The full podcast may be found here

Key points included: 

  • Malaysia’s rubber yield may sound low but specialists think that trees are overcounted. Thailand has faced challenging wet weather conditions and output is down but on the other hand Malaysia’s output is up. Malaysia’s ranking in global production is below.

  • Commodities are handled by different government agencies or statutory boards in Malaysia. There is one for palm oil, rubber, pepper and so forth. (Agronomists seem to complain about these as “silos”). Another complexity in rubber is that different zones have different farmer income models, notably for profit sharing or share cropping. 

  • Rubber is largely produced in the northern states, where palm oil has not taken over these dryer regions. Smallholder experts think that (the true) rubber farmers needing help are individuals in remote areas. But domestically, there has been an understandable push for group farming (with hired/migrant labour) near towns. Perhaps a majority of rubber is produced under profit sharing, and this may need more consideration in current policy. 

A few extra points that didn’t make it, owing to time constraints:

  • A near geographical monopoly concept exists and persists in Malaysian regulations. The ideal is a farmer having multiple mills to sell for then will there be better prices for a standard product. But mills have a clear incentive to partner with their smallholders for product quality and international ESG standards. 

  • A lot can be gained from having information on the location of ultra low-yielding oil palms (“dura contamination” in industry parlance, where yields are -56% of normal yield). The Malaysian Palm Oil Board (MPOB) has invested a lot in detecting via genomic testing. Seeds can be verified for normal yield. There is a marginal cost increase for a major gain in production. One in eight oil palms in Malaysia are ultra low-yield, i.e., financially impaired. This is pretty surprising. 

  • However, the industry needs to reconsider how they can expand these good practices from planting material all the way to harvesting and field logistics, and fairer prices. 

Yu Leng was also invited to give her take on Malaysia’s latest pledge to halt new palm oil plantations in forested areas on BFM’s Top 5 at 5, on 19 August 2024. Deforestation regulations such as the EUDR were raised and how its shaking up global commodity supply chains with origins competing against each other to sell high value add products, however limiting land might cause liberal state development policies to clash against federal powers over exporting and licensing via the MPOB. The full podcast may be found here

Editor’s Note: this clash between state and federal powers over the ban on new palm oil plantations in forested areas has recently materialised in the Kuala Nerus district, Terengganu. As reported by Malaysiakini in September (paywalled), Pure Green Development Sdn Bhd submitted an environmental impact assessment (EIA) to clear a state-owned peat swamp forest to develop a palm oil plantation. Following reports, the Department of Environment rejected Pure Green’s EIA (paywalled) and the Plantation and Commodities Minister, Johari Abdul Ghani, issued a statement (Bahasa Malaysia only) that the government’s bar against new palm oil plantations in forested areas still remains in force and referred to the Malaysian Sustainable Palm Oil (MSPO) certification policy.

SIIA Publishes 6th Edition of the Haze Outlook Report

The Singapore Institute of International Affairs (SIIA) launched the latest Haze Outlook Report on July 8th 2024. The report provides a risk assessment of the probability of a transboundary haze incident affecting Indonesia, Malaysia, and Singapore for the year ahead. This research was supported by Segi Enam Advisors, looking into weather factors, the impact of fires, and commodity prices.

Khor Yu Leng, Associate Director (Sustainability) at the SIIA and Principal of Segi Enam Advisors, commented "Technological advancements and sustainability practices are transforming how we manage and prevent fires. These innovations hold the potential for long-term environmental health and sustained market access."

Download the full report here!

Reported by Nithiyah Tamilwanan (research@segi-enam.com) | 8 July 2024

Testimony for Parliamentary Select Committee on Rubber Downstream Issues and Goodyear's Departure

The impending closure of the Goodyear Tire and Rubber factory in Shah Alam has stirred up public concerns. Goodyear announced that this was part of its “Goodyear Forward corporate restructuring program, aimed at delivering $1 billion in cost reductions by 2025.” However, with over 500 workers impacted by this decision, the Parliamentary Special Select Committee on International Relations and Trade (chaired by Member of Parliament for Subang Jaya YB Wong Chen), met to discuss the company’s decision and the landscape of foreign direct investments in the country.

Alongside MITI, MIDA and other experts, our principal, Khor Yu Leng, was invited to shed some light on downstream problems in Malaysia that affect the automobile industry, such as Goodyear and factors behind their decision to close the Shah Alam factory.

Yu Leng started with an overview of rubber trade trends and domestic consumption over the past few years. She highlighted a significant drop in rubber glove latex use, which was down to 219,000 in 2023 from 402,000 in 2020, while tyres & tubes (from natural rubber) use were down to 26,000 from 33,000. From reports, it appears that China has taken the lead recently in global glove manufacturing.

Exports were 1.2 million tonnes (70:30 compound/mixed:natural rubber), almost entirely to China while imports were at 1 million tonnes, 70% from Thailand and Côte D’Ivoire. Yu Leng debunked narratives on shortages in rubber supply affecting downstream manufacturers in Malaysia, stating that imports are used to fill in the gaps.

She proceeded to display satellite imagery of tyre manufacturers’ plants in Malaysia, including Goodyear’s, for an understanding of their relative sizes and locations. Interestingly, Goodyear’s Shah Alam plant appeared to be layered with solar panels, which invited questions from members of the select committee.

Yu Leng proceeded to draw comparisons between the Thai and Malaysian rubber cities located in Hat Yai and Kedah, respectively. She cited the presence of major companies like Micheline, Schlumberger and Malaysian condom manufacturer Karex-Innolatex at the Thai rubber city, along with better connectivity to ports than the rubber city in Kedah. Malaysia’s motor vehicle production was also only a third of Thailand’s in 2022 due to a lack of competitiveness, an over-reliance on the domestic market and shortages of skilled workers, amongst other factors. Yu Leng also shared insights from rubber suppliers on vehicle sales, competition in the tyre sector from China producers, margins and costs, and shifts in natural rubber supplies.

At the end of her presentation, Yu Leng briefly shared on labour issues plaguing the rubber industry in Malaysia. From DOSM statistics, it seems that 14 percent of our workforce is made up of foreign workers (some say this should be doubled), with international NGOs alleging that there are 200,000 victims of modern slavery in Malaysia. Yu Leng underscored the millions in labour reparations paid out by companies such as TopGlove, Goodyear and ATA-Dyson, and also shared her preliminary calculations on other wage costs, such as transport and housing, that should be borne by glovemakers.

She also highlighted a few instances of new policy thinking on labour, including former Sabah chief minister Harris Salleh’s suggestion to extend the duration of foreign worker permits from one to 15 years. Yu Leng added that this extension should come with a family-based approach, ensuring that children of foreign workers have access to healthcare and education. Additionally, the Plantations and Commodities Minister recently suggested making oil palm harvesting a specialist job to enhance youth involvement in the industry and in hopes of solving labour shortages. She then referred to reports citing 192,655 “excess workers” from manufacturing & services, but plantations fear hiring on “forced labour” concerns.

Upon the adjournment of the hearing, members of the select committee held a press conference at Parliament to sum up their findings. Yu Leng was also invited to share her insights with members of the press. View the full press conference here.



Reported by Nithiyah Tamilwanan (research@segi-enam.com) | 25 March 2024

Intro/Update with Khor Reports-PalmTrack

Announcing an update to our PalmTrack reporting format!

As we’re clustering posts for quarterly release (in Mar, Jun, Sep and Dec) for the rest of 2024, we’re introducing 30 minute chats with our principal, Ms Khor Yu Leng, in Apr, May, Jul, Aug, Oct and Nov. If you’re new to Khor Reports-PalmTrack, do book in a chat via our Calendly link below for a brief introduction to the platform and an overview of our recent updates/focus!

BFM - Restructuring Palm Oil Smallholders

Recently, the Ministry of Plantation and Commodities proposed the consolidation of Malaysia’s smallholders to increase palm oil yield. This involves the grouping of 215,000 independent smallholders into clusters of 8,000-10,000 hectares of oil palm plantations, overseen by medium or large corporations. The initiative could result in an annual increase of CPO production by about 600,000 tonnes, worth USD 2.4 billion. Our principal, Khor Yu Leng, was invited back on BFM’s Morning Run to provide her insights on this proposed initiative.

Yu Leng reviewed the historical contexts of smallholder consolidation in Malaysia, including the development of schemes such as FELDA, FELCRA and RISDA, and recommended a few routes to rejuvenating independent smallholders, including engaging corporations and as part of this, adopting an outcome-driven, smallholder centric, hybrid approach. Yu Leng was also asked to share her thoughts on the recent ruling by the World Trade Organisation on Malaysia's complaint about the EU's ILUC that affects market access for palm oil feedstock into its biofuels mandate system.

For more details, catch the full podcast here.

The Star - Planting New Ideas

“There is a possibility that the palm oil economy will not be adequate to support the densities of rural populations everywhere.”

Segi Enam Advisors’ principal, Khor Yu Leng’s op ed for The Star, Planting New Ideas, reviews the shifts in Malaysia’s palm oil economy, including the industry’s declining yield, over the decades and how rejuvenating Malaysian smallholders may involve engaging corporate players and adopting outcome-driven, smallholder-centric strategies. These could encompass financial support for replanting, new agencies and rural youth involvement, amongst others.

Check out the full article here for more insights!

BFM - Maintaining Malaysia’s Edge in Palm Oil

Malaysia is experiencing a downturn in its crude palm oil (CPO) yield, currently hovering at around 3.4 tonnes per hectare, on par with Indonesia but lower than Thailand, a less optimal planting zone. This has sparked concern within the industry, which recently led Plantations and Commodities Minister Datuk Seri Johari Abdul Ghani to urge the Federal Land Development Authority (FELDA) to focus on enhancing palm oil production yield from its 800,000 hectares of land, instead of venturing into other business areas

Our principal, Khor Yu Leng, was invited to BFM to share her insights on Malaysia’s recent yield performance, factors causing the current trend, pathways for improvement (including capitalising on genomic testing technology) and revitalising FELDA through its youths. 

Catch the full interview here.