Palm oil prices buoyant due to biodiesel demand

Palm oil prices are expected to average RM1,500 (US$408) per ton this year and are projected to increase by 10% next year, as surging world demand for biodiesel fuel is expected to increasingly reduce inventories in Malaysia. Malaysia plans to sell diesel fuel blended with palm oil at domestic pumps by the end of this year and, along with Indonesia, has set aside 40% of palm oil production for local biodiesel production. Three biodiesel plants, with a combined capacity of 276,000 tons, have started production in Malaysia. The country’s total capacity is likely to rise to 1.9 million tons by 2007, with 18 more plants expected to come on stream. (September 14, 2006)