Philippines to replace imported diesel with Coconut oil for ₱19.6Billion; 5% Biodiesel Blend mandate Q4 2013

 

With the approval of the National Biofuels Board (NBB) to increase the mandated biodiesel blend from 2% to 5%, the Philippine Coconut Authority (PCA), in collaboration with the University of the Philippines − National Center for Transportation Studies (UP−NCTS), PCA launched the road test of (B5) in public transport vehicles using 5% coconut oil Biodiesel blend  held on July 30, 2013.

The study will make use of seven (7) in−use jeepneys of operators belonging to transport groups identified by the PCA and Department of Energy (DOE). The tested jeepneys have undergone inspection at the North Motor Vehicle Inspection Center (NMVIC) of the Land Transportation Office (LTO) for assessment of roadworthiness and compliance to emission standards.

The duration of this on-road test was 25 days. For the first five days, the test jeepneys make used of the existing blend (B2). In the succeeding 20 days, these jeepneys were fuelled with the 5% − coco methyl ester (CME) biodiesel blend (B5). After the 25−day on−road test, the participating jeepneys were tested for fuel economy and power efficiency. Opacity tests were also conducted to compare emission performance of B2 and B5 biodiesel fuel blends.

PCA Administrator Euclides G. Forbes bared that mandated use of biofuels would strengthen the domestic market for coconut which will create a ₱19.6 Billion − income as B5 means greater demand for CNO. The country would also save as much as ₱15.5 Billion on fuel displacement.

"This aims to reduce the dependence on imported fuels with due regard to the protection of public health, the environment and the natural ecosystems consistent with the country's sustainable economic growth that would expand opportunities for livelihood, " he added. As the CME blend increases from 2% to 5%, about 1,099 CME plant workers, 13,183 coconut oil (CNO) milling workers and 23,070 farm workers will be hired. Moreover, coconut farmers will benefit ₱4.838 Million per year from the lien collected through the Social Amelioration and Welfare Program (SAWP).

Research and experiments on the use of coco biodiesel as fuel were pioneered by PCA in 1983 together with the other agencies such as Industrial Technology Development Institute (ITDI), Philippine National Oil Company (PNOC−ERDC), National Power Corporation (NPC), and the Department of Science and Technology (DOST). In May 2001, PCA together with the Department of Agriculture (DA) launched a Biodiesel Development Project to test the viability of coconut biodiesel as engine fuel wherein test results showed a reduction of around 50% on their smoke emissions.

"As to the B5 blend, the visible cloud of black smoke consisting of carbon and sulfur particulates is reduced by as much as 80%," Forbes added. Carbon dioxide (CO2) is a greenhouse gas dominant in automotive emissions which mainly contributes to global warming. In contrast, coco biodiesel has a neutral carbon footprint. Coconut tree, once planted, absorbs CO2 during growing stage (called carbon sink). Every liter of fossil diesel displaced by cocodiesel represents a CO2 reduction of 3.5 kg per liter of fuel used.

The Administrator ensures the increased productivity and sustainable supply of biofuel feedstock as PCA continues to implement its massive planting and replanting programs.

Philippines' bio-fuel thrust behind coconut oil surge

In April this year, coconut oil prices were ruling at a discount to crude palm oil in the global market.

Then, coconut oil ruled at $793 a ton and crude palm oil at $800 a ton.

But now, coconut oil prices are quoted at about $900 against $721 for crude palm oil.

In India, coconut oil prices have increased from Rs 61 a kg in April to Rs 78 now.

Prices of copra, from which coconut oil is derived, have increased to Rs 5,500 a quintal from Rs 4,200 in April.

During the same time, palm oil prices have ruled almost unchanged at Rs 55 a kg.

"The current premium that coconut oil enjoys over palm oil is not justified. It has to drop along with other oils," said Dorab Mistry, Director, Godrej International, at a global vegetable oil conference in Mumbai on Sunday.

According to Thomas Mielke, Editor-in-Chief, Oil World, coconut oil began to rise after the Philippine Government announced that it would increase the use of coconut oil as a bio-fuel.

The Benigno Aquino Government on September 20 said it has sought comments from the stakeholders.

The B5 or five per cent coconut oil blended diesel may be implemented before the year-end.

The Philippines had passed a Bio-fuels Act in 2006 making it compulsory to blend coconut methyl ester in diesel distributed locally.

It was aimed at making the country less dependent on fossil fuel.

Besides, it has abundant sources of alternative energy such as coconut oil.

In 2012, the Philippines exported 1.5 metric ton of copra, coconut oil, copra meal, desiccated coconut, coco shell charcoal, activated carbon and coco chemicals a 1.5% increase compared to volume exported in 2011..

This year, coconut oil exports from the Philippines increased to 10.23 lakh tonnes during January-May, more than double during the same period a year ago.

Exports have increased mainly because buyers feared they could be caught short by the increased use of coconut oil for bio-fuel.

"Coconut oil prices are surging since some buyers feel that they are not adequately covered in case of any shortage.

"But with the current peak production season on, we have to see how the seasonal support for it is," said Mielke.

Sources: Philippine Coconut Authority and Business line India

Continue reading

IMF Says Philippines Insulated From Eventual Fed Exit; Only Risk is Upside Growth, Thanks to OFWs

Philippine upside trend economic Growth is invincible 

WASHINGTON—The Fed's eventual exit from easy-money policies will separate the emerging market wheat from the chaff.

One country that can handle the Fed exit is the Philippines, says the International Monetary Fund.

"When tapering does eventually begin, the Philippines' strong fundamentals…position the economy to adjust smoothly to the accompanying capital flow reversal and slowdown in regional growth," says Rachel van Elkan, the IMF's mission chief to the country.

Like many emerging markets, the Philippines took a hit earlier this year when Fed officials started talking about slowing down their large-scale asset purchases meant to spur the U.S. economy. Seeing a new interest-rate environment ahead in the U.S., investors pulled their capital out of emerging economies en masse, causing currency values to free fall and stock markets to plunge.

Although it has since somewhat recovered, the Philippines' peso depreciated 10% from early May to late August.

But Ms. van Elkan says the country's strong current account receipts, net creditor status, steady reductions in public debt and low foreign participation in government debt markets have helped insulate the economy against more capital flight. Manila's own Fed, Bangko Sentral ng Pilipinas, can also release funds from its Special Deposit Account to provide a cushion to growth, she said.

The fund expects the country's growth to only ease slightly next year, to 6% from its current rate of about 6.75% this year. Inflation isn't expected to be a problem, and the government's budget deficit is manageable.

In fact, Ms. van Elkin says risks to the country's growth are to upside.

"Absorbing the ample liquidity into productive sectors may prove challenging," she says, after an annual review of the country's economy.  "Part of the liquidity could finance credit that is used to fuel demand for real estate, potentially with a strong procyclical effect on the economy," she added.

The Wall Street Journal 

Continue reading

Philippines' Quarter 2 current account surplus $2.5-Billion

 

The Philippines' current account yielded a surplus of $2.5 billion, equivalent to 3.6% of GDP, in the second quarter compared to a surplus of $2.3 billion a year ago, the Bangko Sentral ng Pilipinas said in a statement.

The current account is the sum of the balance of trade, net income from abroad and net current transfers.

The Philippines posted a surplus despite weak exports growth.

The country's balance of payments (BOP) position yielded a surplus of $1 billion in the second quarter compared to a surplus of $73 million in the same period last year, due largely to the higher current account surplus and net inflows in the financial account, the central bank said.

The BOP surplus in January to August reached $3.36 billion, central bank data released on Thursday showed. The central bank has forecast a full-year BOP surplus of $4.4 billion.

The central bank has said the country's "healthy" external accounts should help support the Philippine peso.

The Philippines defies external challenges to notch up growth.

Strong domestic demand for a broad range of goods and services is galvanizing economic growth in the Philippines, helping the country to buck a regional slowdown. Consumer confidence remains high, buoyed by news that the government plans to roll out several big-ticket infrastructure projects, in part aimed at creating jobs. However, the Philippines remains vulnerable to many of the external factors that are weighing on its peers

Consumer Show Confidence

The economy expanded at an annual rate of 7.5% in the period April to June 2013, according to the Bangko Sentral ng Pilipinas (BSP), marking a fourth consecutive quarter of growth over 7%.

Commenting on the figures, which were made available in August, the BSP governor, Amando Tetangco, Jr., voiced his hope that the economic performance would "help further anchor market confidence, and thus support the local foreign exchange and stock markets".

"Solid domestic demand should help counter possible negative pressures from global developments," he told the media.

The Philippines' economic expansion sets it apart from some other Southeast Asian markets, where stock exchanges and currencies have fallen, largely due to uncertainty over the US Federal Reserve's asset-purchase program. Figures showed that manufacturing output in Thailand fell for the fourth straight month in August.

In July, ratings agency Standard & Poor's projected 2013 growth of 6.9% for the Philippines, which it said would be driven by "strong domestic demand". "The more domestically-led ASEAN economies, headed by the Philippines and Indonesia, continue to outperform the more trade-dependent newly industrialized economies," the agency reported.

Manufacturing growth rose by 9.7% in the first quarter of 2013 on the back of higher demand for food, appliances, communication and transport. Construction shot up 32.5% in the same period, while services expanded 7%.

Companies tap into demand

On-the-ground developments across the sectors confirm the key role that domestic demand is playing in supporting the Philippines' economy.

Listed beverage bottler Pepsi-Cola Products Philippines plans to tap into strong demand by expanding its facilities. The company's net income for the first six months of 2013 jumped 17% to P657.94m ($15.03m) from P560.41m ($12.8m) in the same period last year.

Coffee growers are also being encouraged to increase output, in a market where demand significantly outstrips local supply. Production reached 30,000 metric tons in 2012, less than half the 70,000 MT consumed.

Sales of domestic appliances in 2012 were up 19.5% on the previous year, according to research outfit GfK Asia. The firm noted in August that 352,680 major home appliances, valued at $352.7 million, were sold across the Philippines between January and June 2013.

"The Philippines has proven it [has] particular strength in mitigating external headwinds because its domestic demand has kept the economy running even as other nations suffered," Vishnu Varathan, a Singapore-based senior economist at Mizuho Corporate Bank, told Bloomberg in July.

Infrastructure Boost

A promising job market, which has been strengthened by the government's plans to roll out several large infrastructure projects, is proving to be instrumental in sustaining domestic growth. National Economic and Development Authority data released earlier this year showed that the Aquino administration approved P439.15 billion ($10.03 billion) for 42 large-scale ventures in 2012.

The initiatives include the P2.59 billion ($60 million) Agus VI hydroelectric power plant, the light-rail transit extension project, valued at P61.53 billion ($1.41 billion), and the P43.33-billion ($990-million) Cavite-Laguna expressway.

The projects will play a key part in facilitating a government bid to create 1 million jobs annually. Presidential Communications Secretary Sonny Coloma said in June that the Aquino administration was focusing on boosting infrastructure, together with agriculture and tourism, to achieve its goal.

"Sustaining high GDP growth of above 5% will be able to provide good jobs to around 2.2 million Filipinos between 2013 and 2016," the World Bank wrote in May. "However, by 2016, that still leaves 12.4 million Filipinos who will have no other option but to work abroad."

Yet money continues to flow in from the nation's overseas workers, with personal remittances reaching $2 billion in April 2013, up 7% year-on-year. "Remittances remained robust on the back of sustained demand for skilled Filipino manpower in various countries worldwide," the BSP said in a statement.

Looking long Term

Analysts believe the time is right for the government to focus on generating long-term economic stability and reducing poverty by harnessing the heady growth levels. In particular, they highlight the need to improve labour regulations and health systems, which will help address the challenge of long-term poverty. "A unique window of opportunity exists today to accelerate reforms," said the World Bank.

With report from ABS-CBN and Businessworld Online

Continue reading