Malaysia moves closer to biodiesel launch

MALAYSIA: Malaysia is expected to start biodiesel production in July or August, which is expected to boost palm oil prices and reduce stocks of the vegetable oil, the country's commodities minister said.

Peter Chin said Malaysian palm oil prices could gain about 8-10 percent this year with the world moving rapidly to adopt alternative fuels.

"The first biodiesel plant will start operations in July or August. That will deplete existing stocks of palm oil," told Reuters late on Wednesday in Malaysia's administrative capital of Putrajaya.

"Assuming that all biodiesel plants start operations as per schedule, we are aiming to produce up to 120,000 tonnes of biodiesel in 2006 and 500,000 tonnes in 2007. The entire amount will be exported," he added.

On Wednesday, Malaysia's July benchmark crude palm oil contract KPON6 fell 7 ringgit to close at 1,458 ($404.1) a tonne.

Chin said that in addition to demand from the country's biodiesel plants, rising orders from the United States and China would push Malaysian crude palm oil prices to 1,600 ringgit a tonne later this year.

"The continued high crude peteroleum prices is expected to make a strong impact in the longer term price outlook for palm oil," Chin added.

He added that Malaysia's crude palm oil output in 2006 would rise by just 1.3 percent to 15.1 million tonnes. Production has grown at an average annual rate of 8 percent over the previous three years. Putrajaya, Thursday, Reuters.