The Palm Scribe

Seen as a good year for palm oil business

JAKARTA – The head of the Bengkulu branch of Bank Indonesia, Endang Kurnia Saputra, is forecasting a good year for the palm oil business and Crude Palm Oil (CPO) in 2018, with prices seen as rising in line with increasing world demand.

“Based on the analysis of the IMF and the World Bank, prices of CPO will continue to rise because world demand was also rising,” Saputra was quoted by Kompas as having said on (3/1/2018).

The rising trend in prices has started to be seen early this week. The price of CPO closed stronger after having fallen for two straight days. Bloomberg data on Tuesday (2/1/2018) showed that CPO prices fin contract for March 2018 delivery rose by 1,2 percent compared to the previous day to reach Malaysian Ringgit 2,532 per metric ton. CPO prices suffered a 19 percent correction in 2017, the highest correction since 2012.

Processed palm oil for May delivery at the Dalian Commodity Exchange closed 1,9 percent stronger to 5,326 yuan per ton, the highest raise for active contracts since October 20.

Saputra said that so far, Indonesia and Malaysia are the world’s top palm oil producers but that the palm oil business was also facing heavy challenges, including through negative campaigns against palm oil plantation from the European Parliament.

“Palm oil is deemed to destroy and reduce forest coverage (deforestation). But that is not true, The European Union even needs palm oil and its CPO needs continue to soar,” Saputra said.

Besides in member countries of the European Union, high demand for palm oil also comes from countries in Asia, including China.

The rosy forecast for the palm oil industry is providing encouragement for the industry, PT Sawit Sumbermas Sarana Tbk (SSMS), for example, is planning to build a CPO mill in Kalimantan in the first quarter of 2018. The construction is estimated to take up to 14 months.

The new plant will increase the company’s capacity that currently stood at 375 metric tons (MT) per hour. A total of some Rp 205 billion is needed to build the plant.

“The company has six palm oil plants and one palm oil kernel plant in Kalimantan. In 2020 our CPO production capacity will reach 525 million tons per hour,” Sawit Sumbermas financial director Nicholas Whittle told the press on Tuesday (2/1/2018).

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