KUALA LUMPUR - Malaysia is in the final stages of discussions to impose a requirement for a higher biodiesel blend, industry and government sources said, as the second-largest palm oil grower looks to whittle stocks down further and support prices.
The Southeast Asian country is ironing out details to increase the palm oil component used in biodiesel to 7 per cent, a B7 blend, from the current 5 per cent, said an industry official with direct knowledge of the discussions.
"So far the direction from the ministry is quite clear.
We're really moving to B7," said the official from the Malaysian Biodiesel Association who declined to be named as the discussions were not made public.
The official said implementation was targeted for December.
A government official who also declined to be named said Malaysia is working out final issues with car manufacturers before implementing the new requirement.
Malaysia's plantation industries and commodities ministry said in August it wants to put in place new biodiesel policies that will help pare down inventories and support palm prices by increasing local consumption.
Indonesia, the top palm oil producer, recently announced plans to raise its own minimum mandatory biofuel requirement for biodiesel to 10 per cent, up from a range of 3-10 per cent. Malaysian palm oil stocks currently stand at 1.78 million tonnes, having eased about 30 per cent from the record 2.63 million tonnes hit at the end of 2012.
By Friday's midday break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had eased 0.5 per cent to 2,453 ringgit (US$779) per tonne after weaker-than-expected export data fanned concerns that demand for the tropical oil has begun to taper.