(Updates with details, background, quotes)
By Emily Chow
KUALA LUMPUR, July 25 (Reuters) - Malaysia’s biodiesel production and exports are set to hit record levels this year as low palm oil prices increase the appeal of blending to make biofuels, the head of an industry association told Reuters on Thursday.
Output is forecast to rise 55% to 1.4 million tonnes in 2019, said U.R. Unnithan, president of the Malaysian Biodiesel Association, while exports are pegged at 600,000-650,000 tonnes, up around 16%-24%.
The forecast comes after the European Commission on Wednesday proposed duties ranging from 8% to 18% on imports of biodiesel from neighbouring Indonesia, countering what it says are unfair subsidies. Indonesian authorities plan to challenge the duties.
“Temporarily this will benefit Malaysia for (biodiesel) exports, which were already quite healthy for the first six months this year,” said Unnithan.
“It will mean higher exports in the second half of 2019. Last year was the best year in terms of overall production and exports, and I’m hoping that 2019 is better than 2018.”
Malaysia, the second largest palm oil producer after Indonesia, produced 900,000 tonnes of biodiesel last year, according to an earlier estimate by Unnithan.
Data from the Malaysian Palm Oil Board put exports at 288,074 tonnes in the first half of 2019, and 515,467 tonnes in 2018.
Low prices for palm oil, which is used as feedstock to make the bio components of biodiesel, have encouraged the uptake of palm-based biodiesel in markets such as China and the European Union, said Unnithan.
Diesel’s premium over palm oil widened this year, hitting $163 per tonne in March, the widest in four months. The spread has since narrowed, falling to $90 on Wednesday.
Reporting by Emily Chow; Editing by Subhranshu Sahu and Richard Pullin