POSCO International Completes Palm Oil Value Chain in Indonesia
POSCO International is completing a palm oil refining plant in Indonesia in partnership with GS Caltex. The company is also considering additional acquisitions of local palm plantations, planning to aggressively expand its food business by establishing an integrated value chain overseas from refining to bio-raw material extraction.
POSCO International will complete a palm oil refining facility with an annual capacity of 500,000 tons in Kalimantan, Indonesia, in mid-November. The plant was built on a 300,000 square meter site with a total investment of 260 billion won in partnership with GS Caltex. The bio-raw materials and edible oils produced will be exported to Indonesia’s domestic market as well as neighboring Southeast Asian countries. Indonesia accounts for more than 50% of the global palm oil market, making it a crucial region for global food security.
Palm oil is vegetable oil extracted from oil palm fruit. Through the refining process, vegetable oil extracted from palm fruit seeds is used for cooking oil or eco-friendly raw materials, while the by-product powder made from crushing the pulp and shells remaining after palm oil extraction is used as raw materials for cosmetics, soap, and detergents.
With the full operation of the palm oil refining facility, POSCO International will complete the establishment of an integrated palm value chain from plantation to refining to bio-raw materials. The company first began developing palm plantations in Papua, Indonesia in 2011, entered commercial production in 2016, and currently operates three oil mills, producing 210,000 tons of palm oil annually. POSCO International recorded $164 million in sales through its Indonesian palm oil business last year.
In addition, the company is considering additional acquisitions of local palm plantations to coincide with the operation of the refining plant. To operate the new 500,000 ton annual capacity facility at 100%, it needs to secure an additional palm oil production capacity of 300,000 tons. POSCO International plans to expand palm oil production from 200,000 tons last year to 340,000 tons by 2027. The company stated, “Nothing has been specifically confirmed regarding additional palm plantation acquisitions,” while adding, “We are reviewing the business from various angles as palm oil demand is expected to increase in the future.”
POSCO International’s expansion into Indonesia’s palm oil business is due to the significant improvement in palm oil profitability caused by global supply shortages. Since 2018, Indonesia has mandated the use of biodiesel mixed with palm oil in all diesel vehicles and machinery, with the mixing ratio starting at 20% and increasing to 40% this year. This has led to increased domestic consumption in Indonesia and reduced export volumes, creating a global supply shortage situation. Additionally, repeated droughts and El Niño phenomena significantly reduced palm fruit harvests, causing global palm oil prices to surge from around $400 per ton in 2020 to $976 as of Nov. 6, more than doubling. An industry official predicted, “Next year, Indonesia’s mandatory biodiesel mixing ratio will expand to 50%, and palm oil prices will continue to show strength due to the effects of palm tree aging and restrictions on new plantation entry.”
In the medium to long term, POSCO International plans to seek balanced development of its three major growth sectors consisting of food, energy, and materials while expanding its Indonesian palm oil business. In August, the company agreed to expand grain trading of corn, wheat, and soybeans to an annual 4 million tons with U.S. grain company Bartlett & Company, and is working to triple natural gas production with Australia’s Senex Energy in the energy sector. Additionally, the company has signed agreements with U.S.-based RiElement to strengthen rare earth supply chains, emerging as a key company in the global supply chain restructuring process.
Through strengthening its three major supply chain businesses, POSCO International is expected to record sales of 32.698 trillion won and operating profit of 1.141 trillion won this year. In particular, the financial investment industry forecasts that operating profit will continue to grow to 1.288 trillion won next year and 1.364 trillion won in 2027.
For almost 30 years of expertise in the agri markets, UkrAgroConsult has accumulated an extensive database, which became the basis of the platform AgriSupp.
It is a multi-functional online platform with market intelligence for grains and oilseeds that enables to get access to daily operational information on the Black Sea & Danube markets, analytical reports, historical data.
You are welcome to get a 7-day free demo access!!!
Got additional questions?
We will be happy to assist!
Write to us
Our manager will contact you soon