Professional Documents
Culture Documents
Sandeep Tekriwal
Van Aroma
Jl.Raya Bypass, KM 20, Padang, Indonesia
vanaroma@indo.net.id
A very good morning to all the IFEAT Members & Delegates present today.
My name is Sandeep Tekriwal and I am from PT. Van Aroma, Padang, Indonesia. I
would like to take this opportunity to share some information on the World of
Naturals in Indonesia.
This lecture will highlight some of the major developments and concerns of the
essential oils industry during the past two or three years especially in regard to
violent price fluctuations in patchouli.
As is known within the industry worldwide, Indonesia is a major supplier of
patchouli, nutmeg, vetiver, cananga, citronella, massoia bark, sandalwood, cajuput,
ginger, clove and its derivatives.
Almost 85 % of the volume / turnover comes mainly from three products i.e.
patchouli, nutmeg and clove.
But first and foremost some basic information on Indonesia, its location and a
SWOT analysis of the country relevant to the naturals industry worldwide.
!
Indonesia is the largest archipelago in the world with more than 17,500 islands,
located between India on the north western border and Australia on the south
eastern border giving it a width similar to that of Canada. It boasts a population of
235 million making it the fourth largest in the world after China, India and the
United States of America, and has a tropical climate with temperatures ranging
from 22C to 32C all year round with plenty of rain and sunshine and a very
fertile land. Its the world biggest Moslem country with almost 88% of the
population following Islam and people are generally religious and tolerant with
many pockets of other communities following Hinduism, Christianity and
Buddhism living side by side peacefully. It is one of the shining examples of a
country moving to a complete democratic form of governance over a short period
of just 10 years. Recent national elections have provided the country with a stable
and strong government with a dynamic president, and a professional team
delivering consistent GDP growth of 4.5-6% over the past 5 years, despite recent
economic meltdown in many western and developed economies.
2)
3)
Supplying 50% of the worlds demand in crude clove oil & 75% of the
worlds clove oil derivatives such as eugenol, iso eugenol, methyl
eugenol etc. Indonesia exports close to 2500 MT of the world demand
of 3500 MT/ Year of crude clove oil and its derivatives.
4)
Having the 2nd highest biodiversity in the world after Brazil, making it
suitable for the production of many other varieties of naturals.
5)
WEAKNESSES
1)
Unorganized field
distillation industry and
production of raw
material with hardly
any significant
contribution from the
organized sector.
2)
Long supply chain between farmers and exporters adding to the overall
cost of the end product.
4)
5)
6)
OPPORTUNITIES
1)
2)
3)
4)
5)
6)
THREATS
1)
2)
3)
The total value of exports of natural essential oils (HS-3301) from Indonesia has
been estimated to be about USD 105 Million, while imports of essential oils stand
at USD 380 million.
Table 1: Indonesia: Imports and Exports of Essential Oils 2003-2008 (US$)
!
Source: Indonesian Bureau of Statistics
Indonesia exports the basic raw naturals without much value addition while it
imports the flavor and fragrance formulations and compounds after value addition
from overseas. The top 5 countries/regions accounting for almost 80% of the total
exports of naturals from Indonesia are:
1)
2)
EU- France/Germany/Italy/Spain
3)
China
4)
Japan
5)
India
PATCHOULI OIL
Traditionally patchouli had been cultivated predominantly in the island of Sumatra
and recently Java, these together accounting for 90% of the production, mainly
coming from areas such as Aceh, the Nias Islands, the Mentawai Islands,
Bengkulu, and Jambi in Sumatra and Kuningan, Malang, Blitar and Garut area in
Java. Over the past couple of years, there has been a significant development in
patchouli oil production in Java and it would be safe to say that in the very near
future Java may overtake Sumatra in total production. Other areas which have been
developing fast are some pockets of Sulawesi and Kalimantan. Most of the
patchouli produced in Sumatra is of the dark variety, while Java produces the light
iron free patchouli, basically due to the use of stainless steel distillation vessels,
while in Sumatra, the traditional small Iron drums are still in use. Sumatra quality
patchouli is still much preferred due to its superior odor value.
We are all aware of the violent price fluctuations which have taken place in
patchouli oil over the past three years (Diagram No: 1).
As one can see from Diagram 1, illustrating patchouli prices during the last 5
years, the prices bottomed to a level of USD 22 in Nov2006 and then peaked to a
level of USD 170 in January 2008 falling to USD 95 in April 2008. Prices fell
further to USD 65 by November 2008 and came close to bottoming out at USD
32-35 in August 2009. Nobody will disagree that this is not a healthy phenomenon
for the industry and we all wish to see a more stable and sustainable price, both for
the producers and the consumers. Most of us are probably still not convinced about
the exact reasons why such fluctuations took place, and we at the Indonesian
Essential Oil Council tried to study some of the probable causes and the effect of
these fluctuations. Some of them are as follows:
PROBABLE CAUSES
1)
2)
3)
4)
5)
6)
7)
The production system- perennial crop farming where the farmers plant
crops which give better returns.
8)
9)
EFFECT
1)
When prices peaked out at levels of USD 170, the actual users
drastically slashed the % consumption of patchouli in their
formulations, thereby reducing demand and the sudden drastic fall in
prices.
2)
3)
4)
We feel that both exporters and importers of patchouli need to play a joint and
responsible role so that possible this situation can be reduced in future. We had
started to address this problem during the IFEAT Budapest Conference in 2007
where Mr. Gunawan mentioned about the Cultiva system of cluster farming and
developing partnerships between international buyers and Indonesian exporters.
IEOC would like to propose some steps which have been discussed during its
meetings, and we believe that this may help in bringing a sense of stability in the
market. More than 75% of the consumption of patchouli is done by the top 10
players in this industry, and similarly more than 85% of exports by volume are
concentrated in the hands of the top 10 exporters from Indonesia. Their role in this
product is crucial for ensuring stability, and that can probably be achieved by
taking the following steps:
1)
2)
NUTMEG OIL
Unlike patchouli oil, price, demand and supply of
nutmeg oil have been pretty stable, ranging
between USD 40 to USD 55 per kg, but recently
prices have started firming upwards towards
levels of USD 65. Farming and distillation
methods for nutmeg oil are far more organized
and concentrated in few pockets in Aceh and west
Java.
Traditionally, prices for nutmeg oil have always
been higher than patchouli, but during the past
couple of years, the price of nutmeg oil has been
lower than patchouli, thereby discouraging
farmers from distilling nutmeg oil. Prices are
expected to further firm in coming months
because of an expected shortfall in crops for the following reasons:
1)
Decreasing yields from nutmeg trees in producing areas of Aceh and West
Java.
Clove leaf and clove stems are mostly used for distillation of clove oil and its
derivatives and the leadership of Indonesia in this is bound to continue in times to
come.
Prices are quite stable and the majority of production
is centralized in the Java and Sulawesi regions.
Because of the strengthening price of cloves recently,
prices of clove oil and derivatives have started
firming up and are expected to go up further in
coming months.
Since Alpina
Malaccensis is grown in the wild, it has
tremendous potential for organic
certification if the demand can be
generated.
2) Aetoxylon Sympetalum Oil
This oil is mainly grown again in the wild in the
Kalimantan islands of Indonesia and distillation
takes place in Kalimantan and Java islands.
Annual production of this oil is about 5-6 MT
per annum and international prices range from
USD 130-140 per KG world ports.
The international
price for this oil ranges between USD 300-350 and
is mainly used in the fragrance industry. Production
of this oil is 2-3 MT per annum but it can easily be
scaled upwards if additional demand can be
generated. It has good potential for growth as it is
much cheaper than the other varieties of
Sandalwood oils.