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Growth Opportunity for Indonesia’s Palm Oil Market and Downstream Activities Finds Frost & Sullivan - Frost & Sullivan is optimistic on growth in Indonesia’s crude palm oil market due to the consumption in the emerging markets such as China and India in spite of the recent downturn in prices which will be short lived
Growth Opportunity for Indonesia’s Palm Oil Market and Downstream Activities Finds Frost & Sullivan

 

NewswireToday - /newswire/ - Jakarta, Indonesia, 2014/09/11 - Frost & Sullivan is optimistic on growth in Indonesia’s crude palm oil market due to the consumption in the emerging markets such as China and India in spite of the recent downturn in prices which will be short lived.

   
 
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Mr. Chris de Lavigne, Global Vice President, Consulting, Frost & Sullivan said that the average consumption of vegetable oils at 19 kg/ capita in China and 14 kg/ capita in India remains well below that of the West that stands at ~65 kg/ capita, thus China and India offering further upside in the food segment which accounts for the bulk of palm demand.

Mr. Chris de Lavigne said that Crude Palm Oil (CPO) has grown from strength to strength in the last two decades witnessing a Compound Annual Growth Rate (CAGR) of 7.5% over that period to become the largest vegetable oil consumed in volume terms, now representing around one third of the vegetable oil market. Were palm oil to sustain such a rate of growth over the next decade demand and land availability permitting - it would become close to being a 100 million tonne market in around 2022.

Growth will mainly driven by Indonesia that has more landbank available than Malaysia and overtook Malaysia several years ago as the main palm oil producer. Mr. Chris de Lavigne also said that weather is one of the key factors in the supply equation of oilseeds and palm oil. It is also an important catalyst to price movement. Eight to sixteen weeks dry condition cause moisture stress in palms. It can reduce production up to 30% of normal situation, depending on severity, he added.
In wet condition, he said that eight to sixteen weeks heavy rainfall cause immediate disruption of harvesting and logistics. It can reduce production up to 15% of potential yield in severe La Nina events, he added.

Conversely, we have seen what the recent glut of soy oil and vegetable oils can do to a market, coupled with a slight slowdown in growth due to slowing economies. Mr. Chris de Lavigne said that Palm Kernel oil is predominantly consumed for oleochemical applications, as well as food. Oleochemical production capacity is increasing tremendously in Indonesia spurred on by the recent CPO Tax structure promoting downstream investments. He said that the key oleochemical companies are Wilmar, Emery, IOI, KLK, Musim Mas, Ecogreen, Socimas to name but a few, and new players have been making an entry such as Evyap in Malaysia.

Biodiesel is also expected to show tremendous growth in Indonesia, backed by Government mandates. It is expected that in 2025, Indonesia could consume as much as 14 million tonnes of biodiesel, all or mostly using palm oil as the feedstock.
Mr. Chris said that Indonesia in 2013 around 50% of oil palm plantation was owned by private companies, 42% by small holders, and only 8% was owned by state-owned companies. While Indonesia still has a significant amount of immature land to come into production, its rate of new plantings has slowed in recent years. In Malaysia, growth has slowed as suitable new land for planting is diminishing rapidly, he added. Labour costs are increasing at a rapid rate in Indonesia and need to be taken into consideration.

He said that other main issues that will need to addressed as environmental problems arising from production of palm oil are deforestation, loss of biodiversity, climate change, land rights, land use and land acquisition, and use of pesticides and fertilizers, but was confident that Indonesia had made tremendous progress in addressing these issues.

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Growth Opportunity for Indonesia’s Palm Oil Market and Downstream Activities Finds Frost & Sullivan

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Palm Oil Market | Frost & Sullivan
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