29/07/2008 (Bernama) - Crude palm oil prices are not expected to decline drastically as global demand for vegetable oils continues to exceed supply, Minister of Plantation Industries and Commodities Datuk Peter Chin Fah Kui, said here Tuesday.

Nevertheless, he said the government would monitor closely present CPO price trends, which were trading at just below RM3,000 per tonne, having come down by RM500 in recent weeks.

Crude oil prices, which influence CPO prices, have fallen to US$123 per barrel from a high of US$147 per barrel.

"We are looking at the trading situation and whether it is for the longer or shorter term as well as the level of stocks," he said when asked on the recent downtrend on CPO prices.

Analysts said the commodities market was likely undergoing a corrective phase.

"Yes, crude oil prices have some influence on CPO prices dropping (but) I don't see CPO prices coming down drastically," he told reporters after launching the "Alternative Raw Materials for the Panel Board Industry" seminar.

In the long run, CPO prices would remain buoyant and hover at reasonable levels.

Chin said the world was short of vegetable oils but demand was increasing especially from the food industry.

Currently, Malaysia, Indonesia and Argentina were the net exporters of palm oil in the world, while Malaysia and Indonesia together produce 85 percent of the world's palm oil output.

On palm oil biomass, Chin said it is a good source of fiber and and it has been used in the production of value added products such as plywood and particleboard.

"Biomass is 95 percent from oil palm and five percent oil. We can make use it in so many ways in order to become profitable," he said.

He also pointed out that the utilisation of oil palm will reduce the demand for solid wood resources and also address environmental concerns.

Chin said Empty Fruit Bunches (EFB), trunks and fronds can be used for producing quality products like paper and furnitures.