Indonesia makes 50pc hike to PKS biomass export levy

: Biomass
20/06/01

The Indonesian government has increased its export levy on palm kernel shell (PKS) to a record $15/t, from $10/t.

The hike in the levy — which comes into force today and is paid in addition to export tax — brings the total export tax package for Indonesian PKS to $22/t. It puts both the levy and the overall tax payment at their highest since Argus began assessing Indonesian PKS spot prices in May 2017.

The finance ministry announced on 29 May that it would change the levy. All payments go into Indonesia's crude palm oil (CPO) fund to support replanting and sustainable practices by smallholders. Export duty had been linked to the country's monthly CPO benchmark since December 2018, but the latest move uncouples the two and fixes the levy at $15/t for an undisclosed period.

The government's decision to fix the levy surprised many market participants, who had expected a lower export rate for June because of weakened CPO spot prices. CPO prices have fallen because of a reduction in global demand amid the Covid-19 pandemic.

Some PKS suppliers expect the higher export rate to push Indonesian PKS spot prices up further and potentially increase demand for Malaysian PKS exports, which are not subject to export levies and taxes. Argus assessed the fob east coast Sumatra Indonesia PKS spot price at $109.21/t on 27 May, when the total tax package was $17/t.

The increase in the export levy was likely driven by mounting pressure to fund Indonesia's 30pc biodiesel transport mandate (B30), which was introduced in January. The country's oil palm plantation fund management agency (BPDPKS) uses national CPO funds to support the mandate by bridging the gap between prices for traditional diesel and more expensive locally produced palm-based biodiesel.

But the spread between diesel and palm-based biodiesel prices has grown significantly as a result of the recent decline in crude prices. BPDPKS distributed around $157mn in subsidies last year, but at the current rate will require more than $2bn/yr to maintain its financial support of the the increased B30 mandate, according to the US Department of Agriculture.

Indonesia's PKS export levy stood at zero for the whole of 2019, when the CPO price was low. It then rose to $10/t for January-May this year, as the CPO benchmark price climbed above $619/t.

Unlike the PKS export levy, Indonesia's PKS export tax remains linked to its CPO monthly benchmark. The export tax on PKS remains at $7/t for June as the CPO benchmark price is $568.94/t.

Indonesia's PKS export tax rises to $10/t when the CPO benchmark is $750-800/t, to $11/t when it is $800-850/t, and to $13/t when it is $850-900/t.

By Sam Hong

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/11/22

Japan’s Taketoyo to resume biomass co-firing in 2027

Tokyo, 22 November (Argus) — Japan's largest electricity producer Jera aims to resume coal and biomass co-firing at the 1.1GW Taketoyo plant in 2027's first quarter, after a fire halted plant operations in January. Jera announced on 22 November that the thermal power plant in central Japan's Aichi prefecture would resume co-firing wood pellets with coal at a rate of 8pc, around the end of the 2026-27 fiscal year ending in March. This will come after its safety measures are completed. The plant's co-firing rate was 17pc before the serious fire, which was caused by an explosion of dust from wood pellets. The company will consider increasing the co-firing rate again in the future, provided safety can be ensured. But the plant will restart coal-only combustion in early January 2025, operating mainly during the summer and winter seasons, when electricity demand is high. Jera will keep operation rates low at Taketoyo and other coal-fired plants when electricity demand is low and rely more on gas-fired generation, to achieve its initial plan to cut CO2 emissions through co-firing at Taketoyo. Taketoyo started co-firing operations in August 2022 and burned around 500,000 t/yr of wood pellets imported from the US and Vietnam. It will burn 200,000 t/yr after it resumes co-firing at 8pc. The plant will slow down the speed of wood pellet conveyors to reduce friction as a part of safety measures, which means it must also reduce its coal and biomass co-firing rate. It is also currently working on other safety measures, such as installing air pressure conveying facilities dedicated to wood pellets and explosion suppressor systems to inject fire extinguishing agents. The outage at Taketoyo has encouraged Jera to boost replacement gas-fired generation, with the extra gas-fired costs accounting for most of the estimated cost resulting from the shutdown, which could be tens of billion yen in the 2024-25 fiscal year ending in March. By Takeshi Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s Enshu Forest starts 7MW biomass power plant

24/11/18

Japan’s Enshu Forest starts 7MW biomass power plant

Tokyo, 18 November (Argus) — Japan's Enshu Forest Energy started commercial operations at its 7.1MW biomass-fired power plant in Fukuroi city of Shizuoka prefecture on 16 November. The Enshu plant will burn 90,000t/yr of wood chips made from unused forest materials and gathered mainly from Shizuoka prefecture. It can generate around 53GWh/yr of electricity, which will be sold under the country's feed-in tariff (FiT) scheme for 20 years. The plant was initially scheduled to come on line in December, but started two weeks earlier as Enshu Forest Energy, the operating company, completed its safety check and test runs earlier than expected. Enshu Forest Energy is a joint venture between renewable power developer Forest Energy, Shizuoka Gas and Power and Japanese utility Chubu Electric Power, with each holding 70pc, 25pc and 5pc shares, respectively. Shizuoka Gasa and Power is a subsidiary of gas provider Shizuoka Gas. Forest Energy runs several biomass generation projects, including the 480kW Tsuwano plant in Shimane prefecture and the 1.8MW Shingu plant in Wakayama prefecture, mainly burning wood chips that are secured domestically. By Takeshi Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Korea’s Plagen plans Azeri green methanol plant

24/11/15

Cop: Korea’s Plagen plans Azeri green methanol plant

Baku, 15 November (Argus) — South Korean clean energy firm Plagen has signed an initial agreement to develop a green methanol production plant near the port of Baku, Azerbaijan. Plagen expects that the plant, which it described as Azerbaijan's first green methanol facility, will produce 10,000 t/yr of the fuel by 2028. It will use Plagen's technology, the firm said at a side event at the UN Cop 29 climate summit today. The methanol will be produced from agricultural waste and wood waste, including hazelnuts shells and almond shells, which will be sourced from Azerbaijan, Plagen chief executive officer John Kyung said. The production process yields 96t of methanol from 300t of biomass. The produced methanol will be used as bunker fuel, and contribute Baku port's goal to reach "carbon neutrality" by 2035 amid increased traffic through the Trans-Caspian International Transport Route, as ships seek alternatives to the fraught Suez Canal route. Kyung said today that the firm also has plans to produce green methanol at Indonesia's Batam to supply as bunker fuel to Singapore, the biggest bunkering port in the world. Plagen also expects 32,000 t/yr of green methanol production by 2027 at a plant in Taebaek, South Korea. This is up from 10,000 t/yr as previously planned . By Tng Yong Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Review delays Brazil's LPG assistance program

24/11/11

Review delays Brazil's LPG assistance program

Sao Paulo, 11 November (Argus) — Brazil's lower house has removed a proposed LPG assistance program from its urgent voting schedule, submitting it to further review and revisions. The program announced in August is still under deliberation, but officials now expect further revisions before it moves forward and launches on 1 January. The bill may add new controls to avoid fraud, the mines and energy ministry's petroleum, natural gas and biofuels secretary Pietro Mendes said last week during a debate in the lower house about LPG. Congressman Hugo Leal, the bill's overseer, told Argus that he will propose creating LPG cylinders smaller than the typical household 13kg models to ease access for low-income families. Low-income families spend 70pc of their resources on housing and groceries, according to Carlos Ragazzo, a researcher at the Getulio Vargas Foundation. That suggests that the current government financial support has likely been used for monthly expenses rather than substituting firewood usage for cooking with LPG. Consumption of firewood for cooking fell from 2005-2015 (see chart) , thanks to improved economic conditions throughout the country, according to energy research firm EPE. But the share of households that use firewood for cooking has hovered around 25pc since 2015, even after the launch of program to promote LPG cooking use in 2021 to help those families during the Covid-19 pandemic. Leal met with lower house leader Arthur Lira on 5 November to discuss the program's proposals and voting agenda, but no details have emerged since. Almost 1mn Brazilian households cook with biomass only. That represents 1.1pc of the 12.7mn households that use biomass for any energy need. Additionally, 56pc of the biomass-only households are low-income families. A 13kg LPG cylinder in Brazil costs R106.63 ($18.49), on average. That represents 7pc of Brazil's minimum wage. Low-income families usually receive only half of the minimum wage, on average. By Betina Moura Brazil residential energy sources Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Talks to restart as port of Vancouver lockout drags

24/11/08

Talks to restart as port of Vancouver lockout drags

Calgary, 8 November (Argus) — A labour disruption at the port of Vancouver is now into its fifth day, but the employers association and the locked-out union are to meet this weekend to try to strike a deal and get commodities moving again. Workers belonging to the International Longshore and Warehouse Union (ILWU) Local 514 on Canada's west coast have been locked out by the BC Maritime Employers Association (BCMEA) since 4 November. This came hours after the union implemented an overtime ban for its 730 ship and dock foreman members. The two sides will meet on 9 November evening with the assistance of the Federal Mediation and Conciliation Service (FMCS) in an effort to end a 19-month long dispute as they negotiate a new collective agreement to replace the one that expired in March 2023. The FMCS was already recruited for meetings in October, but that did not culminate in a deal. Natural resource-rich Canada is dependent on smooth operations at the port of Vancouver to reach international markets. The port is a major conduit for many dry and liquid bulk cargoes, including lumber, wood pellets and pulp, grains and agriculture products, caustic soda and sodium chlorate, sugar, coal, potash, sulphur, copper concentrates, zinc and lead concentrate, diesel and renewable diesel liquids and petroleum products. These account for about two-thirds of the movements through the port. Grain operations and the Westshore coal terminal are unaffected while most petroleum products also continue to move, the Port of Vancouver said on 7 November. As the parties head back to the bargaining table, the ILWU Local 514 meanwhile filed a complaint against the BCMEA on 7 November, alleging bargaining in bad faith, making threats, intimidation and coercion. "The BCMEA is trying to undermine the union by attempting to turn members against its democratically-elected leadership and bargaining committee, said ILWU Local 514 president Frank Morena on 7 November. "They know their bully tactics won't work with our members but their true goal is to bully the federal government into intervention." But that is just "another meritless claim," according to the BCMEA, who wants to restore supply chain operations as quickly as possible. The union said BC ports would still be operating if the BCMEA did not overreact with a lockout. "They are responsible for goods not being shipped to and from BC ports — not the union," Morena says. The ILWU Local 514 was found to have bargained in bad faith itself already, according to a decision by the Canada Industrial Relations Board (CIRB) in October. Billions of dollars of trade are at risk with many goods and commodities at a standstill at Vancouver, which is Canada's busiest port. A 13-day strike by ILWU longshore workers in July 2023 disrupted C$10bn ($7.3bn) worth of goods and commodities, especially those reliant on container ships, before an agreement was met. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more