Palm oil is used in everything from lipstick to biofuels, but its role as a cheaper cooking medium ensures that food accounts for nearly 70% of global consumption of an edible oil whose cultivation is blamed for stripping tropical rainforest.
The EU is looking at new limits on food contaminants in refined fats and oils, including palm oil, said Teresa Kok, Malaysia's minister in charge of the agricultural mainstay.
"Our industry must be ready to anticipate any challenges to these trade impediments and most importantly address the issues, especially on food safety," Kok told a conference on palm oil supply and demand outlook near the capital, Kula Lumpur.
The EU has imposed a limit for glycidyl esters and will soon impose a limit for 3-MCPD esters "that may have an impact on palm oil consumption in food products", Kok said, referring to the contaminants.
The European Food Safety Authority has said the two contaminants raise potential health concerns. A European Commission working group has also discussed setting maximum levels for 3-MCPD esters in food ingredients.
Environmentalists have attacked palm oil over the vast areas of forest they say have been cleared to grow the commodity that is consumed by billions of people.
Kok reiterated that Indonesia and Malaysia - the top two producers of palm - would challenge at the World Trade Organisation another EU law limiting its use in biofuels.
The grouping this year set a 2030 target to phase out palm-based transport fuels from its consumption of renewables after concluding that palm cultivation led to excessive deforestation.
"(This) will continue to cast a bearish sentiment in the international palm oil market because of the negative publicity on palm oil and prices will be affected negatively," Kok added.
Last year, Malaysia launched a worldwide public relations and lobbying effort to protect the reputation of its key export, particularly in Europe.
Malaysia would continue to tackle false accusations from foreign campaigns against palm, Kok said, stressing the need to monitor the operations of non-government organisations and keep them from tarnishing the industry's image.
(Reporting by A. Ananthalakshmi; Editing by Himani Sarkar)