Wilmar to spend $900 million to build processing factories

Wilmar International Ltd., the world’s largest palm oil trader, will build several crude palm oil (CPO) processing factories with an investment worth US$900 million as part of its expansion plan this year.

Industry Minister M.S. Hidayat said on Monday that the company had officially expressed in a written statement its interest to build six CPO processing factories’ produce products with high-added value such as soap and margarine.

“The company will start building the factories in the first quarter of this year,” he told reporters after a discussion on a master plan to accelerate economic development in Jakarta.

One of the factories, Hidayat explained, would be located in Gresik, East Java. However, he said, the government expected another five plants to be built in areas outside Java, including Riau Islands, one of the country’s main CPO producing provinces.

Hidayat said Wilmar would cooperate with the government in building infrastructure near the factories, including harbors, gas pipelines and roads.

“The cooperation has been established,” Hidayat said.

Hidayat added that the government would provide fiscal incentives for the company because the investment would help the domestic manufacturing industry grow and absorb a significant numbers of workers.

Earlier, Wilmar reportedly planned to build an industrial complex for CPO-based factories in Gresik with a total investment of $500 million and the development would run in two phases.

During the first phase, it would build edible oil, packaging and bio-diesel factories, along with a power plant and other supporting facilities, including a clean water plant. Soap processing, NPK and alcohol-based oleo-chemicals factories would be established in the second phase.

In June last year, Investment Coordinating Board (BKPM) chairman Gita Wirjawan said that Wilmar eyed not only building CPO processing facilities, but also investing in the agricultural sector, especially for projects in the Merauke food estate in Papua.

Earlier, the company had said it had already prepared the establishment of a sugar cane plantation as well as a sugar factory in the region.

Meanwhile, the palm oil price declined on Monday as some investors locked in gains after the price surged to the highest level since March 2008, and on speculation that China may be poised to increase interest rates, hurting edible-oils demand.

The April-delivery contract on the Malaysia Derivatives Exchange fell as much as 0.9 percent to 3,861 ringgit ($1,271) a metric ton and was at 3,881 ringgit at 4:57 p.m. Earlier, the price rose to 3,915 ringgit, the highest level since March 2008. The Malaysian markets were closed for the Chinese New Year break on Feb. 3 and Feb. 4, and opened for a half day on Feb. 2.

—JP/Esther Samboh/Ind