Indonesia, the world’s biggest
producer of palm oil, is set to surpass India as the largest
user next year as economic growth boosts demand.
Consumption may climb 13 percent to 8.5 million metric tons from 7.5 million tons this year, Indonesia’s Deputy Trade Minister Bayu Krisnamurthi said by text message. That exceeds U.S. government estimates of 7.95 million tons for India and 7.87 million tons for Indonesia in the 2012-2013 year.
Rising demand for palm used in everything from instant noodles to candy and fuel may curb exports that rose 2.9 percent in October from a month earlier. The economy expanded at more than 6 percent in the past eight quarters as President Susilo Bambang Yudhoyono raised spending, luring investors such as Unilever (UNA) and L’Oreal SA. Palm use in the world’s fourth most populous country jumped 51 percent in the past four years as wheat climbed about 21 percent and sugar rose about 15 percent, U.S. Department of Agriculture estimates show.
“We’ve seen very strong demand growth from Indonesia,” said Erin Fitzpatrick, a London-based analyst at Rabobank International. “You certainly can see that story continuing,” she said by phone Nov. 27.
The country may surpass Germany and the U.K. by 2030 to be the world’s seventh-largest economy, generating $1.8 trillion in sales for agriculture, consumer and energy companies by that year, McKinsey & Co. said in September. McKinsey estimates consumer spending in urban areas will rise 7.7 percent a year to $1.1 trillion by 2030, according to the report.
Unilever plans to spend $150 million building a factory in Sei Mangkei, North Sumatra, that will produce ingredients for soaps and shampoos, said Sancoyo Antarikso, a Jakarta-based director at the unit of the second-largest consumer-goods maker.
Consumer-product companies like Unilever and noodle-maker PT Indofood CBP Sukses Makmur (ICBP) will benefit from a government plan to raise minimum wages, according to John Rachmat, an analyst at PT Mandiri Sekuritas, in a Nov. 22 report.
The Jakarta province will increase the minimum by 44 percent to 2.2 million rupiah ($229) a month in 2013 from this year, said Mandiri Sekuritas. East Kalimantan will boost the wage by 49 percent to 1.75 million rupiah, while Papua, the eastern most province, will raise it by 8 percent to 1.71 million rupiah, according to the report.
Palm-oil refining capacity may climb to more than 30 million tons next year, exceeding output, as companies step up investments following tax changes, Andreas Bokkenheuser, a Singapore-based analyst at UBS AG said last month. Investors are planning $1 billion of investments following the duty reduction, Sinaga said then.
Capacity has gained “significantly” this year, said Krisnamurthi on Nov. 27, without specifying the increase.
The government cut taxes in October last year to boost processed exports as it seeks to raise the value of commodity shipments to spur growth and create jobs. Indonesia, which is rich in minerals such as nickel, bauxite and copper, also started a ban on ore exports by some miners in May, with exemption for companies planning smelters. Those shipments are subject to a 20 percent tax.
To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
Consumption may climb 13 percent to 8.5 million metric tons from 7.5 million tons this year, Indonesia’s Deputy Trade Minister Bayu Krisnamurthi said by text message. That exceeds U.S. government estimates of 7.95 million tons for India and 7.87 million tons for Indonesia in the 2012-2013 year.
Rising demand for palm used in everything from instant noodles to candy and fuel may curb exports that rose 2.9 percent in October from a month earlier. The economy expanded at more than 6 percent in the past eight quarters as President Susilo Bambang Yudhoyono raised spending, luring investors such as Unilever (UNA) and L’Oreal SA. Palm use in the world’s fourth most populous country jumped 51 percent in the past four years as wheat climbed about 21 percent and sugar rose about 15 percent, U.S. Department of Agriculture estimates show.
“We’ve seen very strong demand growth from Indonesia,” said Erin Fitzpatrick, a London-based analyst at Rabobank International. “You certainly can see that story continuing,” she said by phone Nov. 27.
The country may surpass Germany and the U.K. by 2030 to be the world’s seventh-largest economy, generating $1.8 trillion in sales for agriculture, consumer and energy companies by that year, McKinsey & Co. said in September. McKinsey estimates consumer spending in urban areas will rise 7.7 percent a year to $1.1 trillion by 2030, according to the report.
L’Oreal, Unilever
L’Oreal (OR), the world’s largest cosmetic maker, expects to boost sales in Indonesia by as much as 35 percent in the next five years, Vismay Sharma, the company’s country head, said Oct. 29. The Paris-based company is investing $128 million to build its largest factory globally in West Java province.Unilever plans to spend $150 million building a factory in Sei Mangkei, North Sumatra, that will produce ingredients for soaps and shampoos, said Sancoyo Antarikso, a Jakarta-based director at the unit of the second-largest consumer-goods maker.
Consumer-product companies like Unilever and noodle-maker PT Indofood CBP Sukses Makmur (ICBP) will benefit from a government plan to raise minimum wages, according to John Rachmat, an analyst at PT Mandiri Sekuritas, in a Nov. 22 report.
The Jakarta province will increase the minimum by 44 percent to 2.2 million rupiah ($229) a month in 2013 from this year, said Mandiri Sekuritas. East Kalimantan will boost the wage by 49 percent to 1.75 million rupiah, while Papua, the eastern most province, will raise it by 8 percent to 1.71 million rupiah, according to the report.
Blending Rate
Consumption will increase as Indonesia raises the blending rate of palm-based biofuel in petroleum diesel to 7.5 percent from 5 percent, said Sahat Sinaga, executive director of the Indonesian Vegetable Oil Industry Association, said by phone Nov. 27. Demand from oleochemicals is also increasing, he said.Palm-oil refining capacity may climb to more than 30 million tons next year, exceeding output, as companies step up investments following tax changes, Andreas Bokkenheuser, a Singapore-based analyst at UBS AG said last month. Investors are planning $1 billion of investments following the duty reduction, Sinaga said then.
Capacity has gained “significantly” this year, said Krisnamurthi on Nov. 27, without specifying the increase.
The government cut taxes in October last year to boost processed exports as it seeks to raise the value of commodity shipments to spur growth and create jobs. Indonesia, which is rich in minerals such as nickel, bauxite and copper, also started a ban on ore exports by some miners in May, with exemption for companies planning smelters. Those shipments are subject to a 20 percent tax.
To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
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