D&L bullish on coco biodiesel business

MANILA, Philippines — D&L Industries Inc., the listed specialty food ingredients and oleochemicals producer, is optimistic about the prospects of its coco-biodiesel blend business amid reports the government plans to increase the mandated blend to three percent next year from two percent at present.

In an interview, D&L president Alvin Lao said the company sees huge potential growth in volumes and margins for its subsidiary Chemrez Technologies Inc.

The increase would mean the demand would go up automatically by 50 percent from two percent to three percent (B2 to B3 blend). So the effect on volume and margin, will be substantial,” Lao said.

D&L, through its subsidiary Chemrez, is the biggest player in the biodiesel industry with a state-of-the-art biodiesel plant that produces consistently high-quality CME.

“We are the biggest player,” Lao noted.

The Biodiesel Act of 2006 led to the mandated blend of one percent or B1 in 2007 and then to B2 in 2009. The law mandates the use of only biodiesel using coconut oil as feeds stock for production of coco-methyl ester (CME) or coco-biodiesel.

Benefits of a higher biodiesel blend include lower environmental pollution, import substitution, value adding of coconut oil, and mileage improvement.

In 2009, stakeholders expected the blend to increase to five percent but this was put on hold.

But Lao said players have been ready with their increased capacity for a blend of up to five percent.

“If you look at the biodiesel industry, we’re actually ready to provide even up to the five percent blend. What that means is the capacity to supply is the five percent blend, but the actual demand is only two percent. So you have roughly 40 percent utilization,” he said.

As a result, there is low-utilization which means margin is low and everyone is under-utilized.

“We think that when that increase comes, it will likely be gradual,” Lao said.

According to industry sources, the government is planning to implement the increase in biodiesel blend to B3 by July next year and possibly increase this further by one percent per year until it reaches B5 by 2026.