3/12/05 PETALING JAYA, (Bernama) -- The palm oil industry should consider consolidating the refining sector or integrating palm oil business to address the shortage of raw materials, said Minister of Plantation Industries and Commodities, Datuk Peter Chin.

"I feel we should continue to integrate the palm oil business and I understand that only 20 percent of the palm oil business in Malaysia is integrated," he said.

He said that Malaysia is the largest palm oil refining country in the world with refining capacity in operation reaching 16.6 million tonnes annually, which is higher than its annual crude palm oil production.

Crude palm oil production in 2004 was only 13.9 million tonnes.

Hence, there will be competition for raw materials and this will increase the cost of processing for refined palm, he said in his speech at the Association of Malaysian Palm Oil Refiners' (PORAM) annual dinner here.

Chin said that to remain sustainable, cost effective and competitive, the industry should further consolidate the integration of milling and refining with the plantation,

"Through integration we can continue to strengthen our competitive advantage over competing producers of palm oil," he said.

He said that apart from competing among themselves, the refiners face competition from other countries like European Union, India, Pakistan and North African countries which are also developing their own refining capacities.

"This will impose uneasy situation for our domestic refining sector, but the industry is very much market drive and sooner or later the refining industry will have to abide to the market demand and should be prepared for that eventuality," he said.

He said that the industry should venture into higher value chain of the palm oil, even up to the retail level, wherever possible, as policy changes in many importing countries mean that the refined oils have been rendered much less competitive.

It must also make renewed efforts to adopt suitablte new technologies or advanced technologies in the refining sector and further develop downstream products for the country to remain competitive and for the industry to secure new market opportunities.

He said that many opportunities exist for new technologies especially adopting new food processing system.

Chin said that the refining industry also has to prepare for the global biofuel market development.

Over the last few years, global interest in biofuel has increased tremendously, especially in the European Union, which is the largest producer of biodiesel, Chin said.

He urged the refining industry to go for joint venture overseas, forming smart partnerships and strategic alliances by acquiring stakes in leading oils and fats players of importing countries.

"We should increase our marketing capabilities and find new ways to capture and sustain the market," he added.

BERNAMA