PRICE OF PALM OIL AND OTHER VEGETABLE OILS STILL SLUGGISH UNTIL THE END OF THE MONTH

Oil palm is not the only commodity whose piece is sluggish, because other vegetable oils are also experiencing the same thing, such as soybean, rapeseed, and sunflower seed. As stated by Executive Director of the Indonesian Palm Oil Association (GAPKI), Fadhil Hasan, in his press conference on Tuesday (October 21), the weakening of commodities price was due to weak purchasing power, production increase and abundant stocks.

In terms of price, the average CPO price in Rotterdam in September 2014 is in the range of USD 680 – USD730 per MT with average price of USD 712 per MT. Price is down about 5,4% compared to the average price in August at USD 753 per MT. Daily price of CPO in the global market (CIF Rotterdam) is continuously decline starting the first to the third week of October, where prices move in the range of USD 695-USD 730 per MT.

World vegetable oil prices that continue to weaken, including crude palm oil (CPO), is not able to stimulate Indonesian CPO exports. This is reflected in the export performance of CPO and its derivatives from Indonesia in September 2014. Exports of CPO and its derivatives in September only reached 1,685 million tons, down 1.6% compared to the previous month at 1.72 million tons. Export performance year-on-year from January to September 2014 was also down 1.72 compared to the same period last year, i.e. from 15.3 million tons in September 2013 to 15 million tons in September 2014.

The decline in export performance is due to the weak purchasing power of export destination countries (China and India). Although prices are ready low and export duties are also lower than the previous month, it was not able to increase Indonesia’s CPO exports. Weak demand from export destinations was due to economic slowdown in major export destination countries, and prices of other vegetable oils were also low (soybean) so that CPO as substitute oil cannot compete.

In September, the volume of Indonesia’s palm oil exports to India was down 185 thousand tons, or 38% compared to last month, from 490 thousand tons in August to 305 thousand tons in September 2014. The performance of Indonesia’s palm oil exports to India year-on-year was down 26% from 4.5 million tons in January – September 2013 to 3.3 million tons in the same period in 2014. The decline in the performance of experts to India was due some reasons, such as the Indian government plans to raise import duty for palm oil imports, weak Rupee exchange rate against the US dollar, and high inflation in India.

The same thing happens in China. The volume of palm oil exports in September 2014 only reached 56.26 thousand tons, down 31% compared to last month at 81 thousand tons. Export to china year-on-year was down 10% from 1.77 million tons in January-September 2013 to 1.60 million tons in the same period in 2014. Sluggish demand from China is because of the same reason as India, which is the difficulty to obtain bank loan. In addition, china also issued a new regulation on standards for pesticide residues, including edible oils. The volume of Indonesia’s palm oil exports to the European countries also decreased 12% from 341 thousand tons in August to 302 thousand tons. The same thing happened in Pakistan where exports fell 7% from 194 thousand tons in August to 181 thousand tons in September 2014.

What is interesting is that the volume of exports to the United States, where in September 2014 the volume of exports to the United States increased 86% from 36,9 thousand tons in August to 68.8 thousand tons in September 2014. This is interesting because soybean production in South America is abundant and soybean prices are cheap.

Until the end of the month, the price of CPO is predicted to stagnate. GAPKI predicted that CPO prices until the end of October will tend to move in the range of USD 700 – USD 730 per MT. Meanwhile, in October 2014, Export Reference Price is determined by the Ministry of Trade at USD 640 and export duty at 0% with reference to the heightened average price (CPO Rotterdam, Kuala Lumpur, and Jakarta) at USD 710 per MT. Looking at the trend of global CPO prices that move below USD 750 per MT, GAPKI estimated that export duty for October will remain 0%. (E)

Business News - October 24, 2014

PERFORMANCE OF MARINE TRANSPORTATION IN INDONESIA IS STILL LOW

The national maritime sector still great protential, which until now has not been fully optimized. Especially with Indonesia’s strategic position linking the Pacific Ocean and the Indian Ocean an the Asian and Australian continents, the maritime sector should be a concern of the government. Therefore, government’s commitment to manage this sector is necessary in order to become a support of sustainable economic growth.

Chairman of Aquaculture Society and maritime expert, Rokhimin Dahuri, in Jakarta on Monday (October 20), considered that the performance of marine transportation sector in Indonesia is far behind from other countries that have lower maritime potential. It is said that in spite of the sea transport sector that experiences progress, as the largest archipelagic country in the world that becomes the global trade point, the performance of this sector is still low.

According to Rokhmin, indicators of poor performance of Indonesia’s marine transportation sector are, among others, since 1987 the policy for scrapping of old ships of over 20 years until 2010. Indonesia also spent foreign exchange revenue of averagely USD 15 billion/year to pay the transportation service of foreign vessels (exports-imports and domestic transportation between islands). In addition, the issue of cost of containers which is still problematic, such as the cost of container for transporting goods from Jakarta to Surabaya is twice more expensive than the cost of transportation from Singapore to Los Angeles and the cost of transporting oranges from Pontianak to Jakarta is IDR 1,500/kg. But, freight from China to Jakarta is only IDR 900/kg.

According to Rokhim, the cause of poor performance of marine transportation sector is compared with the market potential (volume of goods and passengers) and the size of Indonesian sea territory, quantity and quality (productivity, efficiency, and competitiveness) of Indonesian national fleet which is still low. In addition, the hardware and software in Indonesian ports, in general, are problematic, such as the low competitiveness of Indonesian ports. On other hand, Tanjung Priok and Tanjung Perak ports as an international hub port for exports and imports make Indonesia unoptimal in applying the cabotage principle as set forth in Law No. 27/2008 on Shipping.

Rokhmin said that none of the major countries in the world who is willing to give up national interest in the sea as they are aware of the great potential in the sea, from the biological potential to mineral deposits, such as gold, oil and gas. Large countries, such as the United States and China, made initiatives on maritime security and built strong fleets to secure their interests in the territorial seas.

According to the former Minister of Marine and fisheries, the Indonesia sea potential provides welfare and prosperity opportunities. Indonesia has Exclusive Economic Zone (EEZ) covering an area of 2.4 million km2 with a variety of natural resource potentials ready for exploitation. The economic potential is promising for the prospects of achievement of economic performance which is capable of creating welfare for the people.

However, he acknowledged, as a developing country which lacks the technological capability to explore and exploit underwater resources, Indonesia should establish closer cooperation with technologically advanced countries to explore and exploit seabed energy resources. He explained that the marine economy potential can be developed from a variety of sectors, particularly capture fisheries, aquaculture sector, fishery processing sector, port services sector, port services sector, exploration and exploitation of offshore energy resources, particularly in the EEz area, coastal forestry, trade, shipping, and tourism.

In line with Rokhmin, Vice Chairman of the Indonesian Chamber of Commerce and Industry (KADIN) for Marine and Fisheries Development, Yugi Prayanto, mentioned that there are several things that hampered marine potentials in Indonesia, among others, limited budget for the management of the marine sector. According to Yugi, limited budget in the Ministry of Marine and Fisheries became a problem that inhibits the development of marine potential. He compared the state budget for the fisheries sector which ranges between IDR 6 to 7 trillion per year. While, budget for the agricultural sector reaches IDR 20 trillion/year. (E)

Business News - October 24, 2014

FLOATING OIL-GAS STORAGE SYSTEM INNAUGUARATED, READY TO SUPPORT BUKIIT TUA PROJECT

The oil-gas development project at Bukit Tua, block Ketapang in the Madura Northern Sea in East Java was well underway, completion was 65% to be ready by October 2014. Among the supporting projects to the Bukit Tua project was a floating production storage and off-loading [FPSO] tanker which was just being innauguarated at the Keppel Doc in Singapore on Tuesday [21/10].

The FPSO which was 233 meters long, 43 meters wide 20 meters tall was named Ratu Nusantara symbolizing Indonesia-Malaysia collaboration at the Indonesian waters. The ceremony was attended by the Executive Director of Oil-and-Gas Task Force SKK Migas J. Widjonarko, Minister of the State od Sabah Y.A.B. Datuk Seri Panglima Musa Haji Aman and Country Chairman of Petronas Carigali Indonesia Hazli Sham B Kasim.

“The Bukit Tua field was scheduled to start production in April 2015” Widjonarko was quoted as saying. The initial production would be 5,000 barrels of oil per day and 20 million cube feet of natural gas per day.

Gas production would be supplied to domestic buyers, i.e. Petrogas Jatim Utama for gas and steam powered powerhouse in Gresik. On Friday [17/10] last a contract amandement of gas transaction between Ketapang and Petrogas had been signed. “By this amendment, state’s income would predictably increase by USD 105 million or USD 1.2 trillion.” Widjanarko remarked.

Ratu Nusantara had processing capacity of 25.000 barrels of oil per day and 77 million cubic gas per day 20 thousand barrels per day. This tanker was also designed to store up to 630 barrels of processed oil. Soon the oil produced would be pipelined to buyer’s tanker. Ratu Nusantara was Scorpius Tanker belonging to Keppel Corporation, assembled in 1994 and taken over in Q 4 of 2013. It took 16 months to convert this tanker into FPSO.

Petronas Carigali Ketapang Ltd as operator of Bukit Tua oilfield, had signed collaboration contract to hire FPSO with PT M3 Ketapang Sejahtera, a consortium enterprise between M3 Energy Malaysia and PT TransSamudra Usaha Sejahtera from Indonesia. The contact was valid for 5 years and could be prolonged for two period of 1 year.

Public Relations Head of SSK Rudianto Rimbono explained that to fulfill the cabotage principle applicable in Indonesia this tanker now hoist Indonesia flag. “To fulfill local content requirement, topside parts would be fabricated in Batam” he said.

Hazil remarked further that Petronas had their commitment to develop operational zones managed in Indonesia. “We are conducting further studies to see the potential resources fields at block Ketapang which soon would use FPSO Ratu Nusantara to Maximize utility capacity” he said.

Eight percent of Block Ketapang shares was owned by Petronas and the rest was owned by PT Saka Ketapang Perdana. Bukit Tua was located in Java sea, 35 km north of Madura island or around 110 km North East of Garut, East Java. All the fields were operated by Conoco Phillips, in partnership with Petronas. Since July 25, 2008 this field was fully managed by Petronas. (SS)

Business News - October 25, 2014

PERFORMANE OF THE SEA TRANSPORTATION SECTOR STILL RATED AS LOW

The National Maritime Sector still treasured great potentials so far not fully exploited especially to consider Indonesia’s strategic position between the Pacific Ocean and Indian Ocean and the Asian continent and Australian continent – supposedly the maritime sector had enough Government’s attention. The Government’s serious attention was called for to manage this sector to support sustainable economic growth.

Chairman of the Aquaculture Society who was also maritime expert Rochimin Dahuri stated in Jakarta on Monday [20/10] rated that performance of Indonesia’s Sea Transportation Sector was behind other countries whose marine potentials was low. In spite of some notable progress, biggest archipelago was still low,

According to Rokhimin low performance Indonesia’s Sea Transportation sector was indicated by poor implementation of the scrapping of above 20 years old ship policy since 1987 to 2010. Indonesia was also wasting forex of USD 15 billion/year for paying foreign ships serving import-export and inter insular connectivity. This was not mention containers’ operation management which was problematic. Per container transportation cost from Jakarta to Surabaya was twice as much as from Pontianak to Jakarta was Rp. 1,500/kg while cargo transportation cost from China to Indonesia was only Rp900/kg.

According to Rochimin, performance of the Directorate of Sea Transportation was rated as low because the national armada was low in terms of size, quality, productivity, efficiency, competitiveness and low harbor quality compared to market potential of goods and passengers. Besides, Indonesian harbors were uncompetitive in terms of hardware and software such as indicated by Tanjung Priok and Tanjung Perak international seaport which did not realize the sabotage principle as written in Law no 27/2008 on shipping.

Rochimin stated that no country in the world would release their national in the sea as they were aware of the rich potentials at sea, as they were aware of the rich potentials at sea, from bio life potentials to mineral resources like gold, oil, and gas. Big countries like the USA and China even took the initiative to strengthen their sea security and build strong armada to command over their water territories.

According to ex-Minister of Maritime and Fishery, Indonesian seas treasured wealth potentials for welfare and prosperity. Indonesia possessed Exclusive Economic Zone [ZEE] that stretched over 2.4 million km2 with various potential natural resources ready to be explored.

However he admitted that as a developing country of low technological capacity to explore and exploit undersea wealth, Indonesia could collaborated with other countries to explore the sea. He elaborated that the sea potentials could be developed in various sectors especially the hooked fish sector, cultivated fishery, fish processing, harbor services, exploration and exploitation of oceanic resources especially in ZEE zones, coastal forest areas, trading, shipping and marine tourism.

In tune with Rokhimin, Vice Chairman of the Indonesian Chamber of Commerce and Industry [KADIN] of the Sea and Fishery sector, Yugi Prayitno mentioned that the handicaps in sea exploration effort in Indonesia were among others limited budget for the Sea exploration sector. For comparison he pointed out that state’s budget for the fishery sector was only Rp. 6 – Rp. 7 trillion per year while allocated budget for the agricultural sector was Rp. 20 trillion/year. (SS)

Business News - October 24, 2014

E-COMMERCE NEEDED MORE THAN EVER IN TRADING

The winds of change in communication and transaction from conventional way to on-line was strongly evident as indicated by growing number of Smartphone and internet users. Data of the Ministry of Communication and Information showed that the total e-commerce market in Indonesia was posted at Rp. 130 trillion in 2013 or around 1% of world’s income after reaching Rp. 69 trillion in 2012. Growth of e-commerce shopping in Indonesia was also predicted to increase to 71% in the world with total value of USD 1.8 billion or around Rp. 18 trillion in 2013. Meanwhile the world’s e-commerce market came to USD 1.29 trillion, the Asia Pacific region being the most promising market opportunity followed by the USA and Western Europe.

Erik Hidayat, Chairman of the Creative Economy and Tourism, the Association of Indonesia Young Entrepreneurs stated in Jakarta on Monday [20/10] that execution of Asean Economic Community 2015 would enhance interest in electronic trading. Eric stated that distance would pose as problem when AEC was in effect where distance between buyer and sheller would be hard compared to inter domestic trading,

Indonesian producers wishing to offer products overseas often had no strong capital back up, so e-commerce would be the alternative in marketing the product. Electronic trading, according to Eric, could be benefited by Indonesian businessplayers to expand the market overseas. He said that to promote domestic marketing through e-commerce a sound internet support would be needed, so it was up to the Government to facilitate wide internet service. “in the future trading, internet would be indispensable” Erik said

Erik disclosed that various obstacles must still be put aside by all stakeholders, i.e. the Government, executors and e-commerce practitioners, businesspeople and the people. In the execution, e-commerce, with support if adequate infra structure and facilities could serve as alternative business means in accordance with Indonesia’s geographic condition, total population and business climate. Besides, e-commerce was also a way to minimize unemployment thanks to its easy and simple application.

Meanwhile in developing e-commerce in Indonesia, the Government had taken some protective measures. The Director General of Telematika Application [Aptika], Ministry of Communication and Informatics Bambang Heru Tjahjono stated that the Government had protected local players by issuing Law no 11/2008 on information and Electronic Technology [ITE] and PP No 82 year 2012. The regulation regulated electronic operations system.

Legal wise, Bambang said, he would step up public confidence. Therefore e-commerce needed sound legal protection. At the moment, the Government was in the process of scheming up Government Regulation Plan [RPP] for e-commerce including regulating size of tax to be imposed on e-commerce users. He said that e-commerce was a form of trading so the system must be regulated.

In a modern era where transactions were using in-line, it had become a key method to make transaction easy. E-commerce was rated as more effective in marketing product or transactions. Transaction system in e commerce network was opportunity for Indonesian businesspeople to market their products. (SS)

Business News - October 24, 2014