22/3/07 KUALA LUMPUR (Bernama) -- Oils and fats producers need to work collectively to overcome potential shortages and create synergy that can have a favourable impact on their production costs, said Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Yusof Basiron.

There are synergies in terms of palm oil technical optimisation in various applications and formulations, or in taking advantage of geographical logistic opportunities which can lead to cost savings, he noted.

He felt that demand for oils and fats for bio-fuel will remain relatively large as long as prices are lower than fossil fuel equivalent, he told the National Institutes of Oilseed Products (NIOP) 2007 Annual Convention at Palm Springs, California.

However, the market will eventually come to a balanced situation with the food sector having to pay a high enough price to compete for oils and fats supply, which would otherwise be diverted to the bio-fuel market, he added.

"As only 10 countries are self-sufficient in the supply of oils and fats, major net exporters like Malaysia and Indonesia will continue to focus on palm oil, thus playing a pivotal role in fulfilling the requirements of net importers," he said.

In countries such as the United States, the European Union and Japan, for whom shipping costs from Malaysia or Indonesia are almost the same, he said there is a preference to import from traditional suppliers such as Malaysia for the added quality assurance and other after-sales services by experienced exporters.

Yusof also urged industry players to take the bold step of advocating "a great synergy" between soybean and palm oils to fill the void in the solid fats sector.

In the past, demand for solid fats was primarily met by partial hydrogenation of liquid oils, which are now associated with containing the undesirable trans fatty acid.

"Even for countries which are net exporters of oils and fats, synergies are created by using palm oil either on its own or in combination with other oils and fats," he noted.

Meanwhile, Yusof said there are also opportunities for increased international trade in bio-diesel, adding that Malaysia's bio-diesel programme provides a safety net strategy for the industry, as excess supply of palm oil can be diverted for use as bio-fuel.

It is generally accepted, he said, that bio-diesel will be able to compete with petroleum diesel if there is some form of subsidy, as seen in the EU and US.

-- BERNAMA