Limited growth in palm oil exports expected this year

Linda Yulisman, The Jakarta Post, Jakarta | Business | Mon, February 02 2015
Palm oil producers in Indonesia expect a slight increase in exports this year as demand in key markets remains weak and prices may remain low.

Exports from Indonesia, the world’s top palm oil supplier, could rise by just 2.5 percent to 22.3 million tons in 2015 compared to 2014 as purchases from major buyers — China and India — are not likely to increase significantly due to the economic slowdown and tighter competition from other vegetable oils, according to the Indonesian Palm Oil Producers Association (Gapki).

Shipments to India plunged by 17 percent to 5.1 million tons in the past year from 2013, driven by high inflation and a rise in palm oil import taxes, among other domestic factors.

Shipments to China also fell by 9 percent to 2.43 million tons as economic growth slowed in the
world’s second-largest economy, eroding demand.

Non-traditional markets including Pakistan and the Middle East were expected to provide a significant boost in demand this year, Gapki executive director Fadhil
Hasan said.

Sales of palm oil to Pakistan rose dramatically by 84 percent to 1.66 million tons last year as import duties were lowered following the signing of a trade agreement between the countries, while exports to the Middle East climbed by 16 percent to 2.29 million tons.

“It is not impossible that the composition of main buyers this year will change, with the Middle East, as a region, overtaking China,” Fadhil said.

In addition, traditional markets like the US and the EU would continue to support growth, he added.

Amid abundant soybean stocks in the US, Indonesian palm oil sales to the world’s biggest economy were up by 25 percent to 477,200 tons, helped by a biodiesel program that utilizes palm oil as feedstock, according to Gapki statistics.

Meanwhile, amid the persistent Eurozone economic woes, shipments to the region rose only slightly, by 3 percent to 4.13 million tons last year.

Palm oil is the second-largest contributor to exports in Indonesia, Southeast Asia’s biggest economy, with a value totaling US$21.2 billion in 2014, up 10.42 percent from the year prior.

The price of palm oil, used in products ranging from cosmetics to biofuel, reached its lowest level in five years in 2014, averaging $818.20 per metric ton during the year.

In the final quarter of last year, the price had fallen below $750, the threshold allowed to charge
export taxes, resulting in zero percent tariff.

Production was expected to rise by 4.76 percent to 33 million tons this year compared to 2014, Gapki secretary-general Joko Supriyono said, citing the output generated by trees planted five years ago as the main factor.

He added that weather would not be a major factor affecting production.

“We hope that our domestic consumption will rise to 10.8 million tons this year,” he said. The figure is a 44 percent increase from the 7.5 million tons realized during the past year, buoyed by a mandatory biodiesel blending program. – See more at: http://www.thejakartapost.com/news/2015/02/02/limited-growth-palm-oil-exports-expected-year.html#sthash.WoFNtI9w.dpuf

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