D&L Industries Inc., the country’s top specialty food ingredients and oleochemicals producer, sees huge potential growth in volumes and margins for its subsidiary Chemrez Technologies Inc. if the government increases the mandated coco-biodiesel blend to three percent next year.

In an interview, D&L President Alvin D. Lao noted that, “the increase would mean the demand would go up automatically by 50 percent from two to three percent (B2 to B3 blend). So the effect on volume and margin, we expect that it will be substantial.”

The Biodiesel Law was passed in 2006 and the mandated blend of B1 was imposed 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.

Lao explained that, “everyone in the industry expected (the) planned increase to 5 percent to proceed as scheduled but the blend was frozen at 2 percent from 2009 until today. However, biodiesel manufacturers like us had already increased capacity in preparation for the B5 blend.”

“So, if you look at the biodiesel industry, we're actually ready to provide even up to the 5 percent blend. What that means is the capacity to supply is the 5 percent blend, but the actual demand is only a 2 percent. So you have roughly 40 percent utilization,” he noted. 

He added that, “(this) low utilization means margin is low and everyone is under-utilized, operating at very low capacity. We think that when that increase comes, it will likely be gradual.”

The government is reported to be 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.

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. 

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