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Jakarta Post

Palm oil industry group plays down China effect

  • Khoirul Amin

    The Jakarta Post

Jakarta   /   Thu, September 3, 2015   /  05:17 pm

The Indonesian palm oil industry has not experienced any major slump in business despite declining Chinese demand. To hedge against a Chinese slowdown, palm oil producers have exported their product to non-traditional markets, the Indonesian Palm Oil Producers Association (Gapki) has said.

'€œChina'€™s economic slowdown has not affected our sales volume in any significant way,'€ said Gapki chairman Fadhil Hasan.

Many palm oil exporters began sending out their crude palm oil (CPO) products to non-traditional markets such as Africa, the Middle East and Pakistan in recent years, he explained to The Jakarta Post recently.

Citing data from the association, Fadhil said that demand for Indonesia'€™s CPO from China declined by only 5 percent to 1.9 million tons in the January-July period of this year, a drop from around 2 million tons in the same period of last year. This drop, however, was countered by exports to new and growing markets.

CPO exports to the Middle East hit 1.25 million tons in the January-July period of this year, and is on course to hit last year'€™s export level of 2.3 million tons by the end of the year, according to the data.

The data also revealed that CPO exports to Africa reached 1.3 million tons in the first seven months of this year, already close to the 1.7 million ton exported in 2014.

Most CPO producers started turning to new market hubs other than China beginning in the middle of last year, with many looking to Middle Eastern and Southeastern European countries.

Indonesia, which is the world'€™s biggest palm oil producer, has long made India, China and the European Union its main target market for CPO.

Fadhil said, however, that with market diversification, he was upbeat that Indonesia'€™s CPO exports would hit its target of around 21.7 million tons this year as the country'€™s CPO exports had already hit 14.45 million tons as of the end of July.

'€œWhat concerns most players in the industry is the slump in price,'€ he added.

Meanwhile, Industry Minister Saleh Husin said that the government would try to boost CPO'€™s downstream products in order to provide added value for the local industry, highlighting action currently being carried out by consumer giant Unilever in building an oleochemical plant.

In another development, the coal industry has shrugged off the effects of China'€™s economic slowdown, with a number of coal companies significantly slashing their coal exports to China.

State-run coal miner Tambang Batubara Bukit Asam stated that it had exported very little of its coal reserves to China.

'€œWe have only exported a little bit to China and we mostly export to Taiwan, Malaysia and Japan,'€ said Bukit Asam'€™s finance director Achmad Sudarto.

Achmad said that Taiwan had become his firm'€™s main export destination, accounting for 27 percent of Bukit Asam'€™s total exports.

Another mining firm, ABM Investama, has also been looking into new foreign markets other than China.

'€œWe'€™re looking at the Philippines, Thailand, Pakistan and Bangladesh,'€ ABM corporate strategy director Yovie Priadi said.

Both Bukit Asam and ABM are also diversifying their businesses amid a slump in the price of coal price.

Indonesia'€™s coal price reference plunged to around $59 per ton from over $70 per ton last year.

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