Indonesian CPO producers expect price rise to continue next year on growing demand

Jakarta (Antara News) - The rise in crude palm oil (CPO) prices is expected to continue until next year on growing demand, said Indonesian Palm Oil Producers Association (Gapki) chief Derom Bangun.

"There are several factors that will keep prices high, including biodiesel development in some countries," Bangun told XFN-Asia.

The steady rise in CPO prices is also attributable to CPO demand from the US which is picking up, and to demand for substitute soya oil-based partially hydrogenated oils following implementation of compulsory trans fatty acid (TFA) labeling early this year.

CPO prices averaged 436 usd per ton in the first three months of this year and at 438 usd in the first half to June. Last Friday the CPO price was quoted at 502.50 usd per ton.

"Of course at some point the price will drop as part of normal fluctuation, but the trend (we see) is that the price will be higher next year," he said, without giving any precise price forecast.

Tjahyono Dwi Arianto, corporate secretary of CPO producer PT Astra Agro Lestari, agrees with this view but said that unlike the price of crude oil or other commodities, CPO prices are not so volatile.

"It is going up slowly but the rise is sustainable," he said.

As for biodiesel development, he said a number of companies have begun to produce biodiesel on a small scale in Malaysia and Indonesia, while bigger projects are still being planned.

He said other countries like Germany and the Philippines have also launched their own projects to develop biodiesel using canola oil in Germany and coconuts in the Philippines as raw material.

"They do not use CPO at this stage but as a result of using canola and coconut oil, CPO demand will increase as a substitute for cooking oil," he said, adding that CPO prices in the Philippines are even lower than coconut prices.

Indonesia and Malaysia are the world's largest CPO producers, with each accounting for 43 pct of world CPO production which is expected to reach 36.5 mln tons this year from 33.6 mln in 2005.

Citing an industry report, Astra Agro has said world CPO production is projected to grow by a modest 3 pct to 37.6 mln tons next year. (*)
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