Brazil to Expand Palm Oil Facility

Market has indicated that a consortium of Brazil palm oil players has agreed to spend nearly USD500mio to expand the current production capacity and will become the biggest producer of palm oil in the Americas and such oil will be used to manufacture biodiesel fuel with the increased total production close to 500,000 tonnes of biofuel a year.

It is interesting to note that Vale is involved in this, as it will be partnering with Biopalma da Amazonia. Vale is a multinational engaging in the trade of mostly Iron Ore and has limited handling in palm oil in the past. This shows the increased usage of biofuel (and biofuel needs to be transported by a chemical tanker IMO II) and the shift of Vale strategic move to a more lucrative palm oil business. Vale plans to export after operation begins in 2014.

Vale’s investment in the scheme in the north-central region of Para state will be $305M, but Vale will own 100% of the biodiesel plant. Output would be 500,000 tonnes of biodiesel a year, with Vale itself using 160,000 tonnes a year and Biopalma selling the rest.

Currently, Indonesia is still the largest producer of palm oil in the world with total capacity of 20.5million tonne of palm oil per year and with Malaysia producing approximately 17.5mio tonne per year. Both Indonesia and Malaysia combined palm oil production accounts for 82% of world palm oil production.

According to Indonesian Palm Oil Board (IPOB) vice-chairman Derom Bangun, currently the average oil palm plantation yields in Indonesia was still below three tonnes per ha. It was envisaged that Indonesia’s average yield would increase to 4.5 tonnes per ha from 3.5 tonnes while land under plantation would expand from 7.9 million ha to 10 million ha by 2020.
If this is achieved Indonesia expects to increase its palm oil production to 40mio tonner per year by 2020 which will probably accounts for almost 50% of world palm oil production.

Source: From various sources