JAKARTA/KUALA LUMPUR, July 16 (Reuters) - For decades, Indonesia has shipped out tanker loads of raw palm oil for processing into higher value cooking oil and margarine in Rotterdam, Mumbai and Kuala Lumpur.
Now, the world's No. 1 producer of the edible oil is seeing a more than $2.5 billion wave of investment to build a refining industry that will double its capacity and mean it could supply the entire needs of Asia's top food consumers - India and China.
The transformation - driven by Indonesia's move to slash export duties for processed oil last October - will heat up competition with rivals such as Malaysia and send ripples through the palm oil market as new supply pressures prices of traded refined products such as palm olein, used as cooking oil.
A Reuters survey of 30 firms operating in Indonesia - from the world's biggest listed palm oil firm Wilmar WLIL.SI to conglomerate Unilever ULVR.L - shows plans to nearly double refining capacity to 43 million tonnes of palm oil, or 80 percent of total world output.
"The government is sending a clear message - to survive, you need a refinery. So the palm oil firms are putting their money out and following the big guys in the industry who have already done so," said Thomas Mielke, an analyst at industry publication Oil World.
"There is the threat of over capacity. But palm oil firms with the whole supply chain behind them, we are talking about having plantations to mills and ports, will be the kings."
