Malaysia attacks palm oil stockpile by raising exports

Malaysia, the world's second-largest palm oil producer, will hike exports by 50 percent to reduce a "worrying" stockpile causing by slowing demand, Plantations Minister Peter Chin said Monday.

Chin said stocks currently stood near an all-time high at 1.9 million tonnes as the slowing global economy suppresses demand, worsening the pressure on prices which have slumped 60 percent this year.

Malaysia tightly regulates exports of crude palm oil to protect the tropical oil refining industry, until now enforcing a 2.0 million tonne annual limit.

"We have agreed to allow (exports of crude palm oil) to 3.0 million tonnes ... with immediate effect," Chin told reporters on the sidelines of an international rubber conference.

"Our stocks are increasing. This is worrying," he added.

The stockpile reached an all-time high of 2.04 million tonnes in June this year and Chin said the government hoped to bring it below 1.5 million tonnes.

Crude palm oil is currently trading at 1,750 ringgit (498 dollars) per tonne from a high of 4,486 ringgit earlier this year.

Chin said the government preferred prices at a 2,500 ringgit level.

In 2006, Malaysia issued 90 licenses to firms to manufacture palm oil-based biodiesel, sparking a sharp rise in prices.

Chin also said Malaysia would "work in tandem" with neighbouring Indonesia, the world's number one producer, to stabilise prices.

Malaysia's strategies include pushing for the mandatory use of biofuel, where five percent of public transport vehicles using diesel would be required to use palm-based biofuel.

Chin said the government would also encourage farmers to use the lull in the market to replant their palm oil trees.

Sumber: MSN News