JAKARTA, Feb 9 – Indonesia plans to limit exports of crude palm oil (CPO) to encourage downstream work, the industry minister said on Monday, a move that a trade group doubts would easily lead to the hoped for surge in value-added products.
The plan is unlikely to have any near-term impact on CPO supplies onto the world market and a senior Indonesian palm oil industry official questioned the scope.
The domestic market’s capacity to absorb output of refined products, as well as the government’s definition of such products is key, Joko Supriyono, secretary general of the Indonesian Palm Oil Association (GAPKI), told Reuters.
“It must be clarified what the government means by downstream industry. Do they mean products just like soaps or creams?”
Supriyono said if the government definition of downstream industry excluded refined products the industry has been producing, “it is going to be difficult to achieve the target.”
The industry was also able to produce other refined products such as oleochemicals, biodiesel and fatty acids but their output depended on demand, he added.
Biodiesel firms, which have combined capacity of 3.1 million tonnes, only produced 344,000 tonnes in 2009. They have also stopped supplying state fuel distributor Pertamina from last month awaiting government payments of subsidies.
He said there was a misperception that Indonesia’s palm oil industry only exported CPO, while in fact exports of refined products such as RBD palm olein and RBD stearin accounted for about 40 per cent of total exports.
Indonesia is the world’s top palm oil producer and exports about 70 per cent of its palm oil output per year, of which more than half is in the form of CPO. Rival Malaysia however ships out mostly higher-value refined products.
The government plans to limit exports of crude palm oil to not more than 50 per cent of output in 2015, and to 30 per cent of output in 2020, the minister said.
“Such a target can be achieved by developing the palm oil downstream industry, which can create added-value locally,” said industry minister M.S. Hidayat.
The government has said it plans to build three special palm clusters in the country’s biggest palm-producing province of Riau, in North Sumatra, and in East Kalimantan, where new ports and refining facilities will be built.
Indonesia is trying to increase its capacity to absorb its palm oil output, partly because of slow progress in the implementation of its plans for mandatory biodiesel usage.
GAPKI has forecast that exports will rise 16 per cent this year to 18 million tonnes, following a 12 per cent increase last year. – Reuters
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