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Govt urged to boost use of palm oil in domestic market
The government needs to issue regulations that will boost domestic use of crude palm oil (CPO) as global demand is declining due to economic slowdown, according to Indonesian palm oil producers
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he government needs to issue regulations that will boost domestic use of crude palm oil (CPO) as global demand is declining due to economic slowdown, according to Indonesian palm oil producers.
The Indonesian Palm Oil Board (DMSI) said one way to boost domestic consumption was by issuing regulations that require companies to use palm-oil related products, such as bio-chemical, bio-plastic, bio-lubricant and bio-grease.
'Our domestic market is huge [for CPO],' DMSI's vice chairman Sahat Sinaga told reporters in a press briefing on Wednesday.
Sahat said bio-lubricant and bio-grease were products that have the potential to be developed in Indonesia. Around 650,000 to 700,000 tons of synthetic lubricants that Indonesia imported annually, he said, could be replaced with bio-lubricants.
'We need a regulation that forbids [for example] all food manufacturers and boats from using synthetic lubricants. They should be required to use bio-lubricants. Then it will be helpful,' he said, adding that they will lobby the Industry Ministry to issue such regulations.
He said bio-lubricants and bio-grease, which are now in the last stages of laboratory testing, had strong potential to be used in Indonesia because the material, CPO, is abundant in the country and the price is cheaper compared to synthetic lubricant.
'Synthetic lubricant costs Rp 45,000 (US$3.16) per kilogram, while CPO only cost Rp 6,000,' he said without elaboration.
According to Sahat, one of the reasons the government still imports synthetic lubricant is because it does not contain acid that causes engines to rust.
'But there will be a substance to be added [to the bio-lubricant] that will remove the acid,' he explained. 'One good thing about CPO is that it doesn't contain sulfur so we do not need expensive tools to remove it like in the case of synthetics,' he added.
Sahat said that currently domestic consumption of CPO accounted for only 24 percent of 31 million tons of total national CPO production. He said that the percentage was still small and needed to be increased amid declining global demand.
'The problem with exports is that the international market for CPO is sluggish now,' he said.
Besides increasing domestic consumption, the slump in CPO prices can be avoided by penetrating new markets abroad, according to Sahat.
'We cannot continuously rely on traditional markets. We need to explore other countries such as Pakistan,' he said.
The government has encouraged the use of palm oil in bio diesel for automotive fuel. Beginning early this year, the mandatory blending of palm oil with diesel is raised to 15 percent from 10 percent.
Fadhil Hasan, the chairman of the Indonesian Palm Oil Producers Association (Gapki), said recently that Indonesian palm oil exporters have now began shipping their CPO to non-traditional markets such as Africa, the Middle East and Pakistan in recent years.
Fadhil said that demand for Indonesia's CPO from China had declined by five percent to 1.9 million tons in the January-July period this year, a drop from around two million tons in the same period of last year.
Sahat acknowledged that CPO price now was not as high as in the past.
'CPO price is not as high as the $1,000 per ton level like it was in the past. So, we have to be ready with the worst case scenario if CPO only costs $600 per ton,' he said. (saf)
