28/12/2011 (Jakarta Globe) - A consortium consisting of state plantation company Perkebunan Nusantara III and German engineering group Ferrostaal are set to start construction in January of a Rp 5 trillion ($550 million) palm oil industrial zone in Sei Mangke, North Sumatra.

Dahlan Iskan, the state enterprises minister, said PTPN III would control 30 percent of the consortium, while the remainder of the project would be controlled by Ferrostaal.

“I have checked with Ferrostaal and confirmed that their commitment will not be hindered by the euro zone crisis. By the end of January, the consortium will start construction,” Dahlan said.

He said the consortium would finance 30 percent of the project from its own equity, while the remainder would come from external financing. He added that he expected the construction to be completed by July 2013.

“In the early stage of the operation, PTPN 3 will supply 1.4 million tons of raw materials, or palm oil fruits, to the industrial zone,” he said.

“The problem is that PTPN 3’s current capacity is only 800,000 tons, meaning they will have to outsource their commitment,” he added.

State sea port operator Pelindo I, located in North Sumatra, has been asked to build a port for exporting the palm oil produced in Sei Mangke.

The 640-hectare Sei Mangke project is among the government’s top-priority projects included in the country’s Rp 4,000 trillion Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI).

The industrial zone is intended to boost downstream palm oil industry such as biodiesel, surfactant, oleochemicals, and fatty alcohol.

It is expected to boast a palm oil processing plant capable of producing 75 tons of palm oil fruit per hour, two biomass power plants each with a capacity of 3.5 megawatts and a biogas power plant offering a capacity of 2.2 megawatts.

Indonesia is the world’s largest crude palm oil exporter. The deputy chairman of the Indonesia Palm Oil Council (DMSI), Derom Bangun, was quoted by state news agency Antara on Tuesday saying that India would remain the major buyer of Indonesia’s CPO next year. He projected India would take 7.1 million tons of CPO out of an estimated 2012 output of 25.9 million tons, up from 6.75 million tons in 2011.

“After India, Indonesia’s biggest exports of CPO will go to China and the European Union, where demand will also increase,” he said.

The price of CPO in 2012 is projected to reach $1,050, down from $1,100 per ton in 2011. In the middle of 2012, it is expected to increase sharply to around $1,200.