RI sees bright outlook for palm oil exports

JAKARTA. Indonesia, the world’s biggest producer of palm oil, anticipates double-digit growth in the export of the commodity on the back of an increase in demand for crude palm oil (CPO) as well as refined products in its traditional markets, an industry association said.

Exports would jump by 10.19 percent to a record high of 20 million tons from the 18.15 million tons estimated for this year, the Indonesian Palm Oil Association (Gapki) said on Tuesday. This increase would be driven largely by existing key markets like India, Pakistan and Bangladesh, which would drive demand for CPO. Meanwhile, higher demand for refined products such as olein and biodiesel would also come from China and the European Union (EU), the association said.

Palm oil exports only grew a modest 3.13 percent to 18.15 million tons last year from 17.6 million tons in 2011, while average prices dropped by around 12 percent to US$999.78 per ton, based on CIF Rotterdam reference price last year, on the back of a slow down in international demand and higher supply in the international market.

Gapki marketing chairman Susanto said on Tuesday that local production of palm oil and its refined products such as olein and biodiesel, was estimated to increase by 5.66 percent to 28 million tons.

“The real world demand for palm oil will be steady. The world demand for vegetable oil will reach 5 million tons this year, out of which 2 million tons will derive from palm oil,” he said.

Indonesian producers have benefitted from a new tax regime introduced last year, which slashed export tax on refined palm oil items from 25 percent to 10 percent, to spur growth in the downstream industry, partly to compete with Malaysian rivals.

The new structure supports a progressive tax on the export of CPO that starts when the commodity’s price settles at higher than $750 ton. Exporters should pay an export tax of 1.5 percent for every $50 increase in the price from the threshold.

“We hope that the export of refined products will hit 60 percent, an increase from 58 percent [from total palm oil exports] last year,” Susanto said.

Indonesia delivered around 1.4 million tons of biodiesel last year, with the sizeable amount of it going to the EU, according to Gapki.

Local biodiesel producers are anticipating greater export to Spain, one of the biggest biodiesel consumers within the EU, as the country recently lifted its restriction on imports from countries outside the 27-member bloc.

Indonesia supplied 325,000 tons of the fuel to Spain in 2011, but exports fell to below 100,000 tons last year as the restriction came into effect, according to the Biofuel Producers Association (Aprobi).

Separately, Arif Qasim, chairman of the Pakistan Vanaspati Manufacturers’ Association, which represents 94 companies that produces hydrogenated vegetable oils, told Bloomberg that Pakistan might double its palm oil imports from Indonesia this year due to lower taxes facilitated by a preferential trade agreement (PTA) that had been signed by both countries.

Imports from Indonesia might contribute to 50 percent of Pakistan’s total purchases as the country reduced import duty to 15 percent as of this year. Pakistan imports 3.2 million tons of edible oil per year, and sources more than half of its needs from Malaysia following a tax cut agreed by a PTA sealed in 2007.

“We are buying 75 percent of our needs from Malaysia and about 25 percent from Indonesia now,” Qasim said in a phone interview from Lahore on Monday, referring to annual palm oil imports. “The equation is going to be 50-50 after the agreement with Indonesia.”

Crude palm oil futures plunged by 23 percent last year in Kuala Lumpur, the worst slump since the financial crisis in 2008, as reserves built up for five months up to November. The contract for delivery in March dropped for a fourth day, losing as much as 1.1 percent to Malaysian ringgit 2,391 ($786) a ton on the Malaysia Derivatives Exchange today, Bloomberg reported. (Linda Yulisman/ The Jakarta Post)