06 March 2012 14:17 [Source: ICIS news]
KUALA LUMPUR (ICIS)--Subsidies introduced by the Indonesian government for palm oil refiners are likely to attract more producers to locate to the country, leading to an oversupply of fatty alcohols and acids in the market, an independent chemicals professional said on Tuesday.
An amendment to the taxes paid by oleochemical producers, which led to a massive reduction in export duties, was introduced by the Indonesian government in September 2011.
Speaking at the Palm and Lauric Oils Conference and Exhibition Price Outlook 2012 in Kuala Lampur, Malaysia, Alan Brunskill said the fall in the duties now required from Indonesian refiners had allowed them to “more or less offset their production costs”.
With producers elsewhere increasingly hampered by high feedstock and production costs, Brunskill said there was now a huge incentive for producers to build further refining capacity in Indonesia.
“The Indonesia export tax will skew capacity development to this region,” he said.
Despite consumption of fatty acids and alcohols continuing to rise globally, Bruskill pointed out that growth levels were starting to stagnate.
"With demand in Europe and America particularly flat, the excess capacity would need to be absorbed by developing nations, where demand levels are increasing at a greater rate," he said.
"Crude palm and crude palm kernel oil volumes continue to grow at levels not likely to cause availability problems at present; however, the capacity growth is forecast to outstrip market growth."
Brunskill predicted extra fatty acid capacity to be 1.8m tonnes by 2015, while he expected excess fatty alcohol capacity to reach 0.8m tonnes in the same period.
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