13/1/06 JAKARTA (Asia Pulse) - Executive Director of Indonesia's Joint Marketing Office of PT. Perkebunan Nusantara (PT.PN), Bagas Angkasa predicted that the price of crude palm oil (CPO) on the domestic market would increase in February and March, 2006, due to declining output and increasing demand, and a plan to build biodiesel factories in Asia and Europe.

"Some European and Asian countries have asked for the supply of 5,000 tons of CPO per month to the biodiesel plants in Europe," he said here on Thursday.

He hoped the CPO price in 2006 would be restored to the price in 2004 which averaged Rp4,097 (44 US cents) per kilogram.

The price of the commodity in the domestic market since 2001 reached Rp2,221 per kilogram, and increased to Rp3,109 in 2002, to Rp3,704 in 2003 and reached a record high of Rp4,097 in 2004.

"However, the price of CPO in the domestic market dropped to Rp3,759 per kg last year," said Bagas.

According to him, since November 2005, the CPO market was rather sluggish due to, among other things, the government's uncertain policy on export tax and export price.

He also said that there were lots of things which could lower the price of CPO, like the rupiah's exchange rate, stocks and market demand.

Therefore, he said the price of CPO could not be predicted, at least for a short term.

"A strong rupiah will cause a decline in the price of CPO," he said.

According to him, the ideal price of CPO in the domestic market should range from Rp3,800 to Rp4,000 per kilogram.

"But with the price standing only at Rp3,600, including value added tax (VAT) of 10 per cent, actually we may have had a profit although wages have increased," he said.

Annually, PT PN I-XIII produces two million tons of CPO, with 30 per cent exported.

(ANTARA)