Voluntary Report - public distribution

**Date:** 6/8/2005

**GAIN Report Number:** NL5017

NL5017

**Netherlands**

**Oilseeds and Products**

**Dutch Palm Oil Imports Are Expected To Surge**

**2005**

**Approved by:**

![](media/image1.wmf)Roger Wentzel

U.S. Embassy, The Hague

**Prepared by:**

Bob Flach

**Report Highlights:** In The Netherlands, palm oil imports for food
purposes are anticipated to increase from about 1.2 MMT in 2004 to over
2.2 MMT in 2006. Another potential growth market of several MMTs of palm
oil is as fuel for the production of "green electricity" and as a
component for biodiesel. Palm oil could also be blended with soybean oil
to produce biodiesel.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

The Hague \[NL1\]

\[NL\]

In The Netherlands, a significant increase of palm oil imports is
anticipated. Sector sources expect palm oil imports to increase from
about 1.2 MMT in 2004 to over 2.2 MMT in 2006. This anticipated increase
of at least 1 MMT is based on the construction and expansion of several
refineries in the port of Rotterdam. Palm oil will increasingly replace
other oils for food purposes, mainly due to the lower price compared to
other vegetable oils.

On top of the increased imports for food use, the production of \"green
electricity\" and biodiesel has the potential to boost demand for palm
oil by more than 1 MMT annually. Electricity generation already accounts
for about 400,000 tons of palm oil utilization in The Netherlands. The
Dutch company BIOX bv is planning to build four new power plants, which
will use palm oil as the primary fuel.

Another potential growth market for palm oil is the production of
biodiesel. The Dutch companies BIOX bv and Unimills, a subsidiary of the
Malaysian company Golden Hope Plantations, are conducting a feasibility
study on producing palm oil fractions with lower melting points. These
fractions could possibly be blended with fossil diesel in the
petro-chemical refineries in Rotterdam and exported throughout North
Western Europe. Another option is blending palm oil with soya oil to
produce pure biodiesel.

**Palm oil for food purposes.**

Palm oil will increasingly be used for food purposes mainly due to the
lower price compared to rapeseed oil and sunflower oil. According palm
oil producers and refiners, palm oil is also preferred because it does
not have to be hydrogenated, thus avoiding the production of trans-fatty
acids. The anticipated increase of at least 1 MMT of palm oil for food
purposes is based on the expansion of several refineries:

-Loders Crocklaan (part of IOI Group Malaysia) will build a palm oil
refinery with a capacity of 900,000 MT/yr in Rotterdam. The refinery is
expected to be operational in mid 2005.

-KUOK (a Singaporean/Chinese company) will also build a palm oil
refinery with a smaller capacity of about 350,000 MT/yr. The refinery is
expected to be operational December 2005.

-Cargill Rotterdam is investing in their existing plant to increase the
refining capacity for tropical oils. Capacity for coconut and palm
kernel oil refining will increase by 200,000 MT/yr, and palm oil by
300,000 MT/yr. The plant upgrade is expected to be finished by mid 2006.

The refining expansion of 1.35 MMT will not result in a similar increase
in imports because about 600,000 MT/yr of refined palm oil is already
being imported. These imports will partly be replaced by raw palm oil,
and some imports will be further refined.

**Palm oil for energy purposes.**

# Raw palm oil use for generation of "green electricity".

The main growth market for palm oil is reportedly as fuel for the
production of "green electricity". Oil traders report that so far in
2005, 200,000 MT of palm oil has already been imported for the
generation of electricity in The Netherlands. Sector sources estimate
that the use of raw palm oil by Dutch power plants will reach about
400,000 MT for the full calendar year 2005. The Dutch company BIOX bv
plans to build four new power plants producing "green electricity" in
The Netherlands. These plants will use raw palm oil as the primary fuel.
The electrical power could possibly be exported to other countries in
the EU. Sector sources expect that the use of palm oil for electrical
power generation could grow to one or two MMTs in the coming two to
three years in Northwestern Europe. The availability of palm oil to meet
this increased demand does not seem to be a problem considering the
average annual growth of world palm oil production by about 4 percent
during the past five years. In 2005, world palm oil production is
expected to exceed 31 MMT.

# Palm oil fractions as component for biodiesel.

Another potential growth market for palm oil is the production of
biodiesel. With the increasing use of rapeseed oil for biodiesel
production, rapeseed oil prices are rising. Analysts calculate that for
the EC target of 5.75 percent replacement of fossil diesel by biodiesel,
subsidies would need to increase to more than EURO 6 billion. Another
problem is the limited availability of locally produced oil crops.

An option is to use imported oils, or oils produced from imported crops,
such as palm oil and soybean oil. Anticipating the limited availability
of domestically produced oils, the Dutch Government is expected to lift
the excise tax on biodiesel made from all vegetable oils and animal fats
in September 2005. This is in contrast to policies imposed in Germany
and France, which in practice restrict excise tax cuts to only rapeseed
oil. The proposed Dutch policy will open the way to use any vegetable or
animal fat for the production of biodiesel. Palm oil, however, does not
meet the EN14214 standard, and the German requirement of an iodine
number between 100 and 120 g/100g ^(a)^ (see table). But palm oil could
be fractionized to fractions with a lower melting point and mixed with
fossil diesel. For blends of mineral diesel and vegetable oils, the
EN590 standard has been imposed.

The Dutch company Unimills, a subsidiary of the Malaysian company Golden
Hope Plantations, plans to build a refinery plant for producing palm oil
fractions as component for biodiesel. For this project Unimills
cooperates with the Dutch company BIOX bv. At the moment, both companies
are conducting a feasibility study for the biodiesel project, which is
expected to be ready in Augustus 2005. The feasibility study reportedly
examines the production of palm oil fractions with low melting points. A
part of this research has reportedly already been conducted in Malaysia.
These fractions could be mixed with fossil diesel at an inclusion rate
of 3 to 4% in petro-chemical refineries located in the Rotterdam port.
The feasibility study possibly includes an analysis of the export
potential of this product depending on the biodiesel policies in the
neighboring countries.

***Blending of palm oil and other vegetable oils to produce pure
biodiesel.***

Another option is blending of palm oil with other vegetable oils, such
as soybean oil to produce pure biodiesel. A problem for soybean oil for
use in biodiesel is the high price and high iodine number ^(b)^. A blend
of soybean oil and palm oil, however, would approach the technical
properties of rapeseed oil, and could reportedly meet the EN14214
standards and the German iodine limits.

+--------------------------+--------------------+----------------------+
|                          | Iodine Number      | Melting Point        |
|                          |                    |                      |
|                          | (g/100g)           | (ºC)                 |
+--------------------------+--------------------+----------------------+
| Soybean oil              | 125-140            | --12                 |
+--------------------------+--------------------+----------------------+
| Sunflower oil            | 125-135            | -18                  |
+--------------------------+--------------------+----------------------+
| Rapeseed oil             | 97-115             | 5                    |
+--------------------------+--------------------+----------------------+
| Palm oil                 | 44-58              | 30-38                |
+--------------------------+--------------------+----------------------+

\(a\) The iodine number is an indication of the content of unsaturated
fatty acids. Due to the low content of unsaturated fatty acids, and low
iodine number, palm oil has a high melting point, which makes it
unusable for the climate in Europe.

\(b\) A high iodine number indicates a high content of unsaturated fatty
acids, which have the tendency to polymerize and result in damage to the
engine.