Malaysia to use 500,000 tonnes of palm oil for biofuel

Business Times 6 Aug 08;

(KUALA LUMPUR) Malaysia plans to use 500,000 tonnes of crude palm oil from its swelling inventories in the next two to three months to produce biodiesel to boost faltering prices of the vegetable oil, Commodities Minister Peter Chin said yesterday.

'We are talking about anything in the region of 500,000 tonnes,' Mr Chin told Reuters from Indonesia by telephone.

'The timing should depend on the strategy that we use and the infrastructure to absorb this amount but we plan to do it as soon as possible. Surely in the next two to three months.'

Mr Chin did not elaborate on how the government will utilise crude palm oil stocks for biodiesel and other related industries. State-controlled and privately run plantation firms hold the country's palm oil stocks.

In June, crude palm oil stocks rose 6.38 per cent to a new 25-year high of 2.04 million tonnes. Industry players expect July's stock levels will hover close to record levels, a Reuters poll showed.

Malaysian palm oil prices have plunged 19.1 per cent in the last three weeks on the stock build up and weaker commodity markets, wiping most of the gains recorded since the start of the year and threatening to dent the South-east Asian country's export revenue targets.

Malaysia is the world's second-largest producer of crude palm oil and shipments accounted for 7.6 per cent of exports in June, or equivalent to RM4.4 billion (S$1.85 billion).

Mr Chin had earlier said the government would lower the current stock of crude palm oil in Malaysia by exporting it to countries such as India, Pakistan, China and the Middle East instead of exporting refined palm oil, while increasing exports in winter to the western countries where it could be used as a bio-fuel.

Other measures may include increasing the usage of crude palm oil for bio-fuel production, encouraging local power producers to use crude palm oil as raw material, and having more industries use the commodity as feedstock fuel, instead of diesel\. \-- Reuters