1/12/06 (Reuters) KUALA LUMPUR - Malaysian palm oil producer Carotino Sdn Bhd aims to start its second biodiesel plant next year and has sold out the entire output of its first unit up to March, a top company official said on Thursday.
 
High feedstock costs have spurred the company to raise its biodiesel price by $10 a tonne to $730 for April shipments, Executive Director Unni Krishnan Unnithan told Reuters.
"We have a fairly good market, and we hope to capitalise on it and maintain this leadership position."

Malaysia, the world's top producer of palm oil, has approved licences for more than 50 biodiesel plants, but Carotino is one of the few that have so far started production.

Unnithan said Carotino was not finding it hard to find customers -- despite a sharp decline in petroleum prices and a spike in crude palm oil -- which has sparked a debate on the viability of vegetable oil-based biodiesel.

Crude palm oil, the main raw material for biodiesel, or palm methyl ester, has risen more than 37 percent this year, boosted by firm soyoil prices and on forecasts of strong biodiesel demand in coming months.

The benchmark February contract on the Bursa Malaysia Derivative exchange was up 69 ringgit at 1,958 ringgit ($541) a tonne in afternoon trade on Thursday.

The price of crude oil has slipped more than 20 percent from a record high of $78.40 in July. On Thursday, US light crude was 16 cents lower at $62.30 a barrel at 0803 GMT.

"We are very bullish about the business because we have overcome the technological challenges. It is also the demand and supply situation," Unnithan said.

The company was the first in the world to produce winter-grade palm methyl ester that does not solidify in extreme cold, using technology developed by industry regulator the Malaysian Palm Oil Board.

The privately-owned Carotino, located close to Malaysia's southern port of Pasir Gudang, is a part of the J.C. Chang group, which owns about 40,470 hectares, or more than 100,000 acres, of palm plantations, four crude palm oil mills and a refinery.

Having access to its own supplies of crude palm oil insulates Carotino from price shocks.

"If you are an integrated player, which we are, then you can take such kind of pressures," Unnithan said.

The new 120,000-tonne plant coming up beside the existing unit in Pasir Gudang will boost Carotino's combined biodiesel capacity to 180,000 tonnes by the third quarter of 2007.

The company will be able to sell up to 15,000 tonnes of biodiesel a month after the completion of the new unit. "Construction is going on in full swing, that is why we are able to commit third quarter," Unnithan added.

The firm has expanded its market from transporters and oil companies in Europe to users in the United States, Hong Kong, Japan and Australia.

(US $1 = 3.617 ringgit)