Indonesian Palm Oil Already Diverting Attention Away from Europe

Indonesian is stepping up its search for new markets for its crude palm oil (CPO) as its exports to the EU market are likely to slow in the next few years due to the region's new sustainability criteria related to the commodity.

Joko Supriyono, secretary general of the Indonesian Palm Oil Association (GAPKI), said on September 13 that Indonesia has started to look at new markets including ones in Asia, Eastern Europe and the Middle East, but warned the country "can't abandon the EU market because it is very (important) for Indonesian's crude palm oil (CPO)".

The association's data showed that Indonesia's crude palm oil (CPO) exports in 2008 stood at 7,9 m tonnes. Of that, as much as 968,205 tonnes were exported to the EU from ports in the Netherlands.

The world's biggest palm oil producer currently exports palm oil products mainly to India, Europe and China. The EU market is the second largest for crude palm oil (CPO) exports after India.

Ben Santoso, an analyst at BDS Vickers, told The Public Ledger: "The shift will be the result of new sustainability criteria in the EU. This means it is an EU initiated reduction in demand, rather than Indonesia initiated reduction in supply. Therefore, the impact on the EU market would be to consume more soya and rapeseed oils, rather than palm oil. Because both soya and rapeseed oils are more expensive to produce, there would be higher food prices in the EU, although the inflationary impact may not be that significant."

The analyst noted crude palm oil (CPO) prices would be affected gradually over time, and that it is likely there will be major growth in the Middle East and Africa, as the EU reduces intake.

Rosediana Suharto, head of the Indonesian Palm Oil Commission, urged palm oil producers to meet the criteria laid out in  the directive on the usage of renewable energy that was approved by the European Parliament in April or risk not country in the region wanting to buy the commodity.

Indonesian Palm Oil Association APKI estimated on Tuesday that Indonesian crude palm oil (CPO) exports jumped 65% in August to 1,62m tonnes from a year ago. August exports also rose 48% from 1,09m tonnes shipped in July, the data showed.

Industry officials had anticipated a sharp increase, since exporters had delayed shipments in the preceding month to benefit from an export tax cut that took effect in August.

Indonesia cut the tax on palm oil exports to zero in August and September from 3% in July due to price falls.

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