Malaysia fears RI palm competition<\/p>\n
KUALA LUMPUR (Reuter): Malaysia's palm oil refining industry,
\nlanguishing in the face of poor margins and Indonesian
\ncompetition, is set to see more shake ups without support from
\ndomestic suppliers, officials warned on Monday.<\/p>\n
\"If this situation continues over the next two years, lots of
\n(local) refiners will be cut down,\" cautioned R. L. Parakh,
\npresident of Pan-Century Edible Oils Sdn Bhd, one of the three
\nlargest palm oil refiners in Malaysia, the world's top palm oil
\ngrower.<\/p>\n
Increasing cost of crude palm oil (CPO) and excess refining
\ncapacity over production have for a long time put pressure on
\nrefineries in Malaysia, industry officials said.<\/p>\n
But aggressive rivalry since last year from Indonesia, which
\nhas been trying to sell as much refined oil as Malaysia and at a
\ncheaper price, is making local refiners fear losing hard earned
\nmarkets to their southeast Asian neighbor.<\/p>\n
\"If the government doesn't take a long-term view, it's going
\nto be very, very dangerous. The ready-made markets we have
\ncreated, Indonesia will take over,\" said Parakh in a recent
\ninterview with Reuters.<\/p>\n
Officials said the gravity of the problem was reflected in the
\nclosure by Palmco Holdings Bhd of its refining unit, Palmex
\nIndustries Sdn Bhd, two months ago after citing difficult market
\nconditions.<\/p>\n
The company said returns for its investment at Palmex had been
\nunsatisfactory for the last two years and added that prospects
\n\"are not expected to improve in the near future.\"<\/p>\n
Officials said there were 45 licensed palm oil refineries in
\nMalaysia but only about 20 were active. The giants in the
\nbusiness are also producers, such as state-owned FELDA.<\/p>\n
Together, the active refineries have a capacity to process 11
\nmillion tons of oil while production is less than eight million
\ntons a year, leading to a constant scramble for raw materials,
\nsaid the officials.<\/p>\n
If supply is irregular, margins are worse, say traders
\nfamiliar with the situation.<\/p>\n
Producers' insistence on selling CPO at prices higher or just
\nlower than refined oil has resulted in most refineries either
\nrunning at a loss or breaking even, said traders.<\/p>\n
\"We are the trading arm of growers and millers,\" said a trader
\nwith a local refinery. \"We not only have to compete with
\nIndonesian palm oil but also against soybean oil, rapeseed oil,
\ngroundnut oil, coconut oil and sunflower oil.<\/p>\n
\"When the local producers don't support us, we have to cut our
\nmargins,\" said the trader.\"But we can't sell below cost.\"<\/p>\n
Traders said the average cost of refining a ton of palm oil
\nwas about US$30-$40.<\/p>\n
Parakh said most refiners had diversified into various
\nbusinesses because of the bleak outlook in the industry. Pan
\nCentury, which is not a palm oil producer, also owns
\noleochemicals and rubber products businesses.<\/p>\n
\"If you're strong, you can survive a year or two until the
\ncycle returns in your favor, like last year when China came to
\nbuy Malaysian palm oil in big way,\" said Parakh.<\/p>\n
A board member with the Palm Oil Refiners Association of
\nMalaysia, Parakh said he had once suggested a buffer fund for
\npalm oil to help both producers and refiners when prices were
\ndisadvantageous to either side.<\/p>\n
\"But vested interest among refiners who are also producers
\nprevented this,\" he said. \"There should be more cooperation among
\nus for the survival of the whole industry.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/malaysia-fears-ri-palm-competition-1447893297",
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