Food firms on alert over Indonesia's palm oil export ban
Nongshim's shrimp snacks are displayed on the shelf at a supermarket in Seoul in May, 2020. Yonhap
By Kim Jae-heun
Local food companies are paying close attention to a move by Indonesia to stop exports of its palm oil as this could further raise prices of instant noodles, snacks and other processed food products here, according to company officials Monday. The companies have already increased prices in recent months, reflecting soaring raw materials costs as a result of global supply chain problems and Russia's invasion of Ukraine, putting a heavier financial burden on households.
“The Indonesian government has not yet revealed its specific plan on the ban of palm oil exports, so the Korean food industry is closely watching the issue. However, if the price of cooking oil increases, local companies will face higher costs in manufacturing their products,” a food firm official said. Indonesian President Joko Widodo has banned the export of cooking oil and its source materials from April 28 until further notice.
In Korea, palm oil is not used to cook food at home. However, it is widely used at factories to produce processed foods like chips and instant noodles. Palm oil is also an important raw material to make cosmetics and detergent.
As Korea imports 56 percent of its palm oil from Indonesia, local food firms and cosmetics companies will inevitably raise prices of their products if the Southeast Asian country continues the export ban.
Lotte Foods' headquarters in Seoul / Courtesy of Lotte Foods
The country's largest instant noodle producer Nongshim said it has no plan for a price hike in the short term.
“We use palm oil imported from Malaysia, so we are not in short supply of cooking oil for our products. However, the Indonesian government's export ban of the raw material can increase the price of Malaysian palm oil, so we are closely watching the situation,” a Nongshim official said.
Lotte Foods also said it uses Malaysian palm oil so it won't be affected harshly by the export ban from Indonesia. However, if the supply shortage of cooking oil continues around the world, Lotte Foods will have to prepare for price hikes of its food items, the company official said.
“We have enough stocks of palm oil for the next two to three months, so it won't be a big problem for now. However, Lotte Food is much affected by the price of cooking oil and its price fluctuation can affect us to adjust our product price accordingly,” a Lotte Foods official said.