Muddy roads slow PKS deliveries in Indonesia’s Riau

Muddy road conditions in Indonesia's Riau province are slowing collection of fresh fruit bunches and impeding palm kernel shell (PKS) deliveries to stockpiles, market participants said.

Heavy rain in the region during December and January resulted in flooded palm plantations and roads between plantations, mills and stockpiles, participants said. The slowdown in deliveries has weighed on stockpiles at the Buton and Dumai ports in the region.

Some participants observed that some roads between the plantations and mills are more prone to being affected by floods, as they tend to lack proper infrastructure, which turns the roads muddy and soft in wet weather. The rain and floods have resulted in slower trucking, slowing the overall collection of fresh fruit bunches and PKS, with some trucks reported to be stuck in mud and others overturned.

At least one supplier has requested to delay shipments, as its stockpile is unlikely to have sufficient stocks for cargoes for March loading and onwards, because trucks are unable to deliver PKS at previously expected rates. But some participants remain unaffected by the road conditions as they had collected sufficient stocks in preparation of the annual monsoon season, which typically sees delays to trucking.

Some truck owners were also increasing trucking fees because of the slowdown, while some mills are increasing their offers to make up for the loss of palm fruit volumes caused by the rain, at a time when stockpilers are expected to request additional cargoes owing to the delays in deliveries to stockpiles.

The start of the low-yield season is also expected to cause supplies to tighten, with a participant expecting the peak of the season to hit over April-May and end around June, participants said.

Argus last assessed the 90-day spot price for PKS meeting Japan's feed-in tariff (FiT) sustainability requirements at $131.28/t fob east coast Sumatra, and the PKS market for material that does not meet Japan's FiT sustainability requirements at $103.77/t fob east coast Sumatra on 7 February.

By Deborah Sun