Palm oil demand prompts new European venture

The first phase of this ambitious expansion plan began this week with the clinching of a deal with Elstar Oils, an edible oils and fats producer in Poland, which will see the Malaysian firm help develop, manufacture and market a range of speciality fats and oils for the food industry in the EU.

P.N. Agarwal, Premium Nutrients' managing director, said that the EU countries have huge market potential, and that the initial focus would be on high-growth sectors such as the production of trans fat-free or healthly fats for margarine or the speciality fats for the animal feed industry.

Listed on the Warsaw Stock Exchange, Elstar Oils produces refined oils and fats for the food industry. Its primary focus is on the manufacturing of rape seed oil and other vegetable oils and fats to be sold to the food and non-food sectors. Elstar's current manufacturing capacity is around 60,000 tons per annum.

Premium's chairman Tan Sri Dr K.R. Somasundram said that the joint venture was likely to be carried out in three phases, with phase one being purely marketing, followed by manufacturing in phase two and the setting up of an independent manufacturing plant in the final phase.

"Our plans to go into manufacturing would be a gradual process as it means setting up facilities in Poland. At this point, we have identified a port to set up a terminal, which will facilitate imports and handling of lauric (palm kernel oil and coconut oil) and palmatic products, over the course of time,"​ he said.

Premium is one of the global pioneers in the manufacture and sale of speciality fats and oils across all industries, which include food, pharmaceuticals, animal feed, lubricants, paper and textile.

Palm oil is becoming increasingly important as an ingredient in a wide range of foods, not least because it is trans-fat-free. Trans fatty acids are formed when fats are hydrogenated to make them more solid and extend their shelf life, and are thought to increase the risk of cardiovascular disease and cancer. Because palm oil is semi-solid naturally, it does not require hydrogenation.

Although widespread commercial plantings only began in the 1990s, Malaysia is now the world's largest producer of palm oil, and continues to benefit from a growing awareness of the health properties of the antioxidant-rich oil. Indeed, palm oil is now second only to soybean oil in terms of global demand, accounting for 28 per cent of total edible oil sales.

But this popularity has led to an increasing problem in meeting demand and inevitably prices have risen sharply. "In early 2002 palm oil reached $300 per metric tonne, but over the last few weeks this figure has tipped $500,"​ an analyst at the US Department of Agriculture Foreign Agriculture Service told FoodNavigator.com​ back in June.

As a result, edible oil companies have joined forces to create a new organisation, the Roundtable on Sustainable Palm Oil (RSPO), whose principal objective is to promote the growth and use of sustainable palm oil through co-operation within the supply chain and open dialogue with stakeholders.

Premium Nutrients' move into the EU market is also well timed. "The EU has seen a rise in demand for palm oil, possibly linked to the anti-GM issue as well as the debate about trans fatty acids,"​ the FAS spokesperson added at the time.

Indeed, other companies are also looking to cash in on this growing popularity. A new palm oil plant - the biggest in Europe - is due to open in the Dutch port of Rotterdam in mid 2005, owned and operated by former Unilever subsidiary Loders Croklaan. Now owned by Malaysian palm plantation owner IOI, Loders said it hoped to process 2,500-3,000 tons of palm a day.

"Palm opens real market opportunities for Loders Croklaan, as well as for our client companies who are looking to eliminate trans fats from their food products,"​ said the company's CEO Etienne Selosse earlier this year.