KUALA LUMPUR: Malaysia will increase the amount of palm oil in biodiesel from 5 percent to 7 percent from November, as the world's No.2 palm grower tries to reduce stockpiles and prop up prices that have fallen nearly 20 percent this year.
Malaysia was also studying the possibility of again raising the mandate for palm oil in diesel to 10 percent, plantation industries and commodities minister Douglas Uggah Embas said on Tuesday, although he not give any timeline for implementation.
Crude palm oil is increasingly being used as an additive to fossil fuels as it can reduce costs and cut down on environmentally damaging emissions.
The so-called B7 biodiesel blend programme would boost the domestic use of biodiesel to 575,000 tonnes a year, Douglas told reporters in Kuala Lumpur, and could help boost palm prices.
"This will contribute towards a savings of 667.6 million litres of diesel a year," he said.
The B7 biodiesel blend will be imposed in Peninsular Malaysia from November onwards, a month ahead of an earlier proposed schedule, and from December for Sarawak, Sabah and Labuan territories.
National implementation of the current 5 percent minimum palm content in biodiesel ran into problems earlier this year due to delays in construction work of key blending facilities located in the Borneo islands.
However, Douglas said talks between the government and industry, including automobile manufacturers and petroleum companies, had ensured there were no issues in raising the mandate to 7 percent.
The benchmark January palm oil contract on the Bursa Malaysia Derivatives Exchange had edged up 0.7 percent by 0300 GMT to 2,180 ringgit ($665) per tonne.
Malaysian palm prices, which set the tone for global prices, plunged nearly 28 percent during the first eight months of the year, hitting a five-year low of 1,914 ringgit on Sept. 2 as stockpiles surged to a more than 1 year high above 2 million tonnes.
Futures have risen since September amid signs of weaker output due to the rainy monsoon season, although the recovery has been capped by worries of surging supplies of competing edible oils.
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