Thailand’s central government is working to develop its palm oil industry, and the strategy includes promoting demand for bio-lubricants, -greases and -transformer oils, the National Palm Oil Policy Committee announced recently.
Especially in Asia, palm oil is one of the most popular sources of oleochemicals, chemicals like fatty acids, fatty alcohols, glycerols and esters used in the production of bio-lubricants as well as other materials. Thailand’s production of palm oil has been growing, but it now has an oversupply, so the government wants to increase demand by developing industries that use them.
Get alerts when new Sustainability Blog articles are available.
The government has identified six categories of products to target: base oils, biological transformer oil environmentally friendly detergents containing methyl ester sulfonates, bio-lubricants and greases, paraffin and environmentally benign pesticides.
Policies will focus on five areas:
- support for new manufacturing methods, infrastructure, science, and creativity, through programs like Thai innovation registration, which aims to accelerate the commercialization of innovative ideas;
- standards and testing, by establishing industrial product standards;
- investment incentives and other benefits to companies for research and development;
- promotion of eco-friendly products to increase demand for environmentally benign goods;
- and other areas such as the Eastern Economic Corridor development plan for the oleochemical industry.
Chaiwat Sowcharoensuk, an analyst at Krungsri Research, a business arm of Bank of Ayudhya, noted that the government has adopted a standard for B10 diesel – diesel containing 10% renewable ingredients – and assessed that this has created enough demand to balance the current domestic supply of palm oil.
“Krungsri Research anticipates that the push for the B10 measure is still the main policy to absorb raw materials of palm fruit and crude palm oil in the country,” Sowcharoensuk told Lube Report. “As a result, measures to develop the oleochemical industry will be added as another measure to aid in the absorption of palm produce. This will result in a stable palm price and sustainable development.”
Sowcharoensuk said that “the oleochemical industry is one of the industries that the Thai government is pushing, especially an environmentally friendly production model that is in line with the development of the concept of bio-economy and the Office of Industrial Economics has a master plan for the bioeconomy scheme to promote Thai farm products and aims to be the biochemical hub of Southeast Asia by 2027.”
According to Krungsri Research’s 2020 to 2022 industry outlook report, Thailand has been expanding its palm oil planted area, and an influx of maturing oil palms planted earlier are now producing high yields, leading to oversupply in recent years.
“Domestic demand for crude palm oil is expected to rise by 3% to 4% per annum, underpinned by strong government support for the sector – for example, government efforts to stabilize prices and increase the use of biodiesel,” the report said. “Despite this, the supply glut will continue to depress fresh oil palm prices.” The company said Thailand’s production of palm oil last year is expected to increase by 4% to 3.3 million tons with a share of about 95% for domestic consumption of refined oil and biodiesel products.
According to global consultancy firm Kline & Co.’s “Bio-Lubricants: Market Analysis and Opportunities” report last July, global bio-lubricants accounted for less than 1% of the global finished lubricants market at 350,000 tons in 2019. In terms of volume, North America consumes about half of the world’s bio-lubes, followed by Europe with about a quarter of demand. Asia-Pacific and South America consume the remaining 25%.
The company forecast bio-lubes to record a 3.5% compound annual growth rate from 2019 to 2024. The worst-case scenario predicts a 1.6% growth rate due to the COVID-19 pandemic.