31/10/06 (Business Times)   - MALAYSIA'S palm oil exports in 2006 are set to hit a new record of RM31 billion on the back of robust global demand from the food, oleochemicals and biodiesel industries.

Industry officials said export receipts for this year can hit RM31 billion, 3 per cent more than the current record of RM30.44 billion reached in 2004.

Malaysia is the world's largest producer and exporter of palm oil and its related products are sold to over 140 countries.

"Demand for biodiesel in the European Union (EU) remains strong and is expected to sustain into the next year," said Golden Hope Plantations Bhd group chief executive Datuk Sabri Ahmad.

Demand for biodiesel, which is a combination of any vegetable oil (palm oil included) and crude oil-based diesel, strengthened when crude oil prices hit a record high of US$78.40 (US$1 = RM3.64) a barrel in mid-July on the New York Merchantile Exchange.

As a result, energy producers worldwide have been scrambling for other cheaper alternatives such as blends of palm oil and rapeseed oil with diesel or the mixing of ethanol made from corn and sugar with petrol.

The EU has decreed that every tank of fuel should consist 5.75 per cent biodiesel by 2010. The German Government had shown further commitment to a cleaner environment when it recently announced compulsory blending of 5 per cent biodiesel into petroleum-based diesel from January 1 2007.

Also notable is that while the EU imposes a 6.5 per cent import duty on biodiesel entering into Europe, it is understood that biodiesel shipped out from Malaysia is not subject to this duty.

"Yes, we anticipate another export record this year - both from Malaysia and for the world as a whole. Calendar 2006 Malaysian exports will probably rise by around 3 per cent from 2005," said New York-based Trade News Service publisher Dennis C. Maxfield.

He said exports will be higher in line with increasing demand from the biodiesel sector and the value could approach or even surpass the RM31 billion mark.

Earlier this month, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said between August and December, Malaysia can export biodiesel valued as much as RM100 million which inevitably adds weight to the RM31 billion forecast.

Plantation owners are positive on the outlook of crude palm oil (CPO) prices.

IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng, in a meeting with reporters after his company's annual general meeting yesterday, forecasted that CPO prices can rise as high as RM1,900 per tonne next year.

In a telephone interview, TH Plantations Bhd managing director Datuk Rashidi Omar said it is possible that palm oil exports will hit a record high this year on the basis of rising CPO prices.