JAKARTA (TheInsiderStories) – Singapore based Sinar Mas Cepsa today inaugurated its first oleochemicals plant in Indonesia, representing an investment of US$$357 million (equivalent to EUR 300 million) over two years. The plant will produce fatty alcohols from sustainably-sourced palm kernel oil, a key ingredient in the manufacture of everyday products such as household cleaning goods and personal care products.

Sinar Mas Cepsa is a wholly-owned joint venture (JV) set up between Golden Agri-Resources (GAR), the world’s second-largest vertically-integrated palm oil company, and Cepsa, a leading integrated energy company and world leader in the production of linear alkylbenzene (LAB) used to make biodegradable detergents.

The plant’s inauguration ceremony, which took place in Dumai, Sumatra, was attended by officials and dignitaries from the Indonesian Ministry of Industry, Airlangga Hartanto, Chairman & CEO of GAR, Franky O. Widjaja and Cepsa CEO Pedro Miró.

Widjaja explained how this joint venture was created with a mutual vision to develop a global leading position in fatty alcohols and its derivatives, based on a supply of sustainably-sourced raw materials. Sinar Mas Cepsa’s vertical integration and the launch of the Dumai plant is a critical step in achieving this vision.

“The partnership with the chemical division of Cepsa is key in our growth strategy. They have a diversified portfolio, leading in the areas where they operate in the chemical industry. Entering the fatty alcohols value chain is another step in our internationalization plan, and ensuring we partner with a reputed and trusted domain expert was paramount,” he also commented.

Kung Chee Whan, Sinar Mas Cepsa CEO, also elaborated how the Dumai plant leverages Cepsa’s technology and expertise in oleochemicals, relying on GAR for raw materials—marking the second plant of this partnership. Having already secured a foothold in Europe through the acquisition of a surfactant plant in Germany, the company will definitely look into further downstream projects or capacity expansion in this part of the world.

“If we try to summarize in just one word this project within Cepsa, I would say the word is ‘New’. New feed stocks. It’s the first time that we will produce chemical products that are not derived from petrol, but are instead vegetable-based – new location, new business and new market,” he added.

The global market for natural fatty acids is predicted to reach US$16.2 billion by 2021, up from US$12.4 billion in 2016, demonstrating a five-year compound annual growth rate (CAGR) of 5.6 percent. Of this, the bulk of the revenue generated will come from Asia-Pacific, which currently commands over 65 percent of overall capacity.

The Dumai plant has an annual production capacity of 160,000 metric tons of fatty alcohol.  Sale of the vegetable-based alcohols, increasingly in demand as a raw material for personal care products and liquid detergents, will primarily focus on markets in Asia. The plant will also serve demand from Sinar Mas Cepsa’s surfactant plant in Germany, which serves markets in Eastern and Western Europe.

GAR’s Lubuk Gaung refinery, which is RSPO-certified and located nearby, supplies the plant with certified sustainable, traceable palm kernel oil. The Dumai plant is also fully self-sufficient, capable of producing its own electricity, treating its waste water and managing its own logistics. The investment has directly resulted in 300 jobs for Indonesians

Vegetable Palm Oil Outlook Rosy

Previously, Malaysian palm oil futures gained for a third straight session, to hit their highest point in more than six months on Wednesday, as trading breached a psychological barrier and market was upbeat about the industry outlook. Benchmark palm oil contracts for November delivery on the Bursa Malaysia Derivatives Exchange shot up 1.56 percent to 2,873 ringgit (US$685.68). Trading volumes were 57,600 lots of 25 tons each.

Earlier, contracts hit 2,876 ringgit, their highest since March 8. They have risen 4 percent in three days. The market likely rallied in anticipation of a positive outlook from an industry event in India. The futures index rising above the psychological level of 2,850 ringgit also helped. The market is expected to track updates and insights from industry speakers at the three-day Globoil India conference, starting on Wednesday.
US$1 = 4.1900 ringgit
US$1 = Rp13,300

Euro$1 = US$1.19

Writing by Yosi Winosa, Email: yosi.winosa@theinsiderstories.com