The Federal Land Development Authority (FELDA), the largest palm oil manufacturer in the world, has high hopes for China now that the nation has raised the quota for imports and showed a strong demand for the product in the first quarter.

Tan Sri Mohamed Yusof Noor, the chairman of the Malaysian firm, said his company aims to boost exports to China from 800,000 tons in 2005 to 1 million tons this year.

He estimated China's total demand for palm oil imports is 5 million tons.

To accommodate demand from countries like China and India, FELDA has decided to increase its production of palm oil from 3 million tons to 5 million tons this year.

"We have been exporting palm oil for the past 10 years, but the Chinese market is definitely a top priority for us and it will be more important in the future," said the chairman.

One reason for the optimism of the State-owned plantation group is the lift of import quotas on palm oil by China this year.

Statistics from the Ministry of Agriculture show that China's imports of palm oil rose by almost 20 per cent to 899,000 tons in the first quarter of this year.

According to the Ministry of Commerce, 68 per cent of the palm oil imported into China last year came from Malaysia.

While oil, food and detergent makers in China expand production capacity, their demand for palm oil also increases. Palm oil can be used for cooking and as chemical raw materials.

While Chinese firms import a lot of palm oil, many refineries are also being built, trying to refine oil inside China, a challenging situation for FELDA.

The Malaysian firm is to go to Shanghai and nearby areas to discuss the possibility of enhancing co-operation with Chinese partners, including providing crude oil for Chinese refineries or forming joint ventures.

FELDA, which vows to become the world's biggest palm bio-diesel producer, also aims to export palm oil to China, as the country is thirsty for energy alternatives to petroleum.

Tan Sri Mohamed Yusof Noor said FELDA already has some orders from Europe to supply oil palm as a raw material for bio-diesel products.

Europe is the largest producer of bio-diesel and makes 90 per cent of the world's total. The consumption of bio-diesel in Europe already accounts for 5 per cent of the total fuel consumption.

China, a latecomer in the development and use of bio-diesel, only made 60,000 tons of bio-diesel last year, but the goal for 2010 is 2 million tons.

Guofeng Group in East China's Anhui Province invested 465 million yuan (US$58 million) in April to build a bio-diesel production base with an annual production aim of 600,000 tons.

Source: China Daily