Posco's palm oil business in Indonesia becomes a cash cow

Posco's palm oil business in Indonesia becomes a cash cow. May. 06, 2024 07:42. by Jae-Hyeng Kim monami@donga.com.
It was a sweltering morning on April 23 at a palm oil farm owned by Bio Inti Agrindo (PT BIA), POSCO International’s palm oil business corporation, which is located in Merauke in Papua, Indonesia. Such cruelly hot weather gives desirable living conditions to palm trees. Most fruits were tinted with deep red in the 3.47 million and 5,000 trees planted across the farm, signaling all-year peak harvesting time.

Papua Island, located in the far east of Indonesia and well-known for consisting of many islands, is home to the palm plantation business. It is 265 kilometers from Mopa International Airport at the bottom of the island. It is 34,200 hectares in area, half the size of Seoul City.

Widely used across various food industries for cooking oil, snacks, and instant noodle products, palm oil is likely to be more highly utilized as biofuels for aviation, for instance. In June 2011, POSCO International started cultivating this barren land to make inroads into this industry at a time when access roads were not even built around it.

Ten years later, this farm became a cash cow with more than 50 million dollars in operating profit per year. Back in 2022 when raw material prices soared due to the consequences of the COVID-19 pandemic, it recorded a new high operating profit of 80.36 million dollars. It performed well in this year’s first quarter, with an operating profit of 19.65 million dollars. “We looked ahead in Indonesia, one of the world’s largest palm oil producers,” PT BIA CEO Kim Won-il said. “Our efforts are paying off.”