27 Sept.2002 (Business Times) - A CONSORTIUM of Malaysian plantationcompanies is mulling construction of storage tanks for palm oil in severalAfrican states to tap the RM1 billion-a- year market.

Several locations are being looked into, including in West Africa and thesub-Saharan area.

Possible locations include Cameroon, Ivory Coast, Senegal, Benin, Rwanda,Mozambique, Namibia, Malawi, Uganda, Burundi, Madagascar and Angola.

With each tank capable of storing between 500 and 1,000 tonnes of palmoil, the move is seen as a commitment to enter the continent in a big way.

Malaysian Palm Oil Promotion Council member Victor Ngo said the council isleading a feasibility study, which is still at a preliminary stage.

“We will look into factors such as market potential, costing, tanks andland availability, local customs, banking laws and duty structure,” Ngotold Business Times recently.

“Should the results of the study be positive, then we can push for theconsortium to set up such a facility.”

Malaysia exported 520,015 tonnes of palm oil to Africa last year,accounting for 4.9 per cent of the country’s total palm oil exports of10.6 million tonnes worth RM10.12 billion.

A total of 35 countries from the continent bought the commodity, valued atRM511.9 million.

In tonnage, exports to Africa last year was an increase of 13.2 per centfrom 459,155 tonnes in 2000. In 1999, the continent bought 400,455 tonnesof palm oil from Malaysia.

South Africa was the biggest buyer with 163,607 tonnes worth RM148.6million; followed by Algeria with 82,045 tonnes (RM87.7 million) andNigeria with 78,732 tonnes (RM73.1 million).

Others import from as little as one tonne, such as the Island of Reunionand Mali’s four-tonne purchase. Tanzania imported 44,172 tonnes.

Africa also produces palm oil, but its production cost is higher at US$700(US$1 = RM3.80) a tonne compared with Malaysia’s US$200 a tonne.

This means that if Malaysia were to aggressively enter the African market,it could offer a competitive price and suit the needs of Africa’s majorityof middle- to low-income households.

“What is important is that the consumers there are assured of a steadysupply of palm oil rather than having to depend on shipments which can beirregular,” said Ngo.

He added that the number of tanks needed and the storage capacity woulddepend on each nation’s needs.

As an example, Nigeria which has the potential to import between 400,000and 500,000 tonnes annually in future will need monthly deliveries ofbetween 20,000 and 30,000 tonnes.

Transit time will take up to about 30 days and ideally, tanks with acapacity of between 1,000 and 2,000 tonnes which are equipped with heatingcoils can be rented or built by the industry to store the palm oil inNigeria.

Likewise, Ghana which has the potential to buy 60,000 to 80,000 tonnesannually would need tanks that can stock between 6,000 and 10,000 tonnes.

“African buyers involved in small-time margarine making, cooking oil, andalso big corporations such as Unilever want to be assured of a steadystream of supply,” said Ngo.

“We can also entice additional customers because palm oil availabilitywill assure manufacturers of continued supply the moment they pay,” saidNgo who is also managing director of Josovina Commodities Sdn Bhd, a palmoil trading company.

Ngo added that findings of the study can be used to set up a similarfacility in eastern Europe comprising countries of the former Soviet Unionsuch as Turkmenistan, Azerbaijan, Georgia, Kyrgyzstan, Ukraine andUzbekistan.

“The region has the combined potential of buying up to 200,000 tonnesannually and two tanks with a capacity of 5,000 tonnes each can be madeavailable to cater for monthly shipments,” said Ngo.

The council is also mulling the idea of setting up tanks in the heart ofpalm oil’s greatest rival, soyabean-producing countries such as Brazil andArgentina.

“There is a market there for palm oil because it costs a bomb for thecommodity to be delivered from Sao Paolo, north of Brazil, to Rio DeJaneiro in the south.

He said that due to high logistics cost locally, it is cheaper to importpalm oil from Malaysia than to buy from Sao Paolo. It cost between US$35and US$40 to ship a tonne of palm oil from Malaysia to Brazil.

Elsewhere, it costs US$60 to ship a tonne of palm oil from Rotterdam inEurope to Africa. A direct shipment from Malaysia only costs US$20 atonne.

Currently, Malaysia delivers palm oil to Africa through Europe, via theSuez Canal. The commodity is then re-shipped to Africa from the Northalong the continent’s West coast.