'Dramatic' carrageenan supply chain shake up as Indonesia eyes domestic processing

By Annie Harrison-Dunn

- Last updated on GMT

European agar and carrageenan importers will have to rethink their supply chains because producers from other countries will no longer have unlimited access to the raw material from Indonesia, says Swiss development organisation
European agar and carrageenan importers will have to rethink their supply chains because producers from other countries will no longer have unlimited access to the raw material from Indonesia, says Swiss development organisation

Related tags Raw material Indonesia

Indonesia plans to process half of its seaweed domestically by 2020, meaning the carrageenan supply chain could see massive geographic diversions in the future. 

Switzerland Global Enterprise, which is endorsing the project, estimated that the country accounted for around 75% of the global production of cultivated tropical seaweed. Historically this raw material was exported to markets like China and the Philippines for processing, but now Indonesia is seeking to add value to its seaweed sector by processing locally.

Speaking at the industry event HiE in Amsterdam, Pirmin Aregger, Switzerland Global Enterprise programme manager for food and tourism said this would shake up the carageenan supply chain “dramatically”​ - ensuring greater traceability with fewer country links for European manufacturers to keep track of. 

Aregger said some buyers were not aware how much of their stock originated from Indonesia, with some believing they were purchasing 100% Filipino carrageenan. He said it was important for these buyers to redirect their trade now, before it was too late.

“This shift from exporting dried seaweed as a raw material to exporting processed agar and carrageenan will have an impact on global supply chains for hydrocolloids. Importers of agar and carrageenan in Europe will, for example, have to rethink their supply chains because carrageenan and agar producers from other countries will no longer have unlimited access to the raw material from Indonesia,”​ Switzerland Global Enterprises said in a booklet for buyers set for publication in January.  

Ins and outs

Artati Widiarti, director of foreign market development for the Indonesian ministry of marine affairs and fisheries, told FoodNavigator this change would not come without its challenges since the Chinese government had greater means to financially incentivise the processing sector.

Aregger said the government could achieve its 50% goal with three main points: promoting export, helping companies increase capacity and enforcing an export tax on dried seaweed.


It remains unclear whether Indonesia will enforce an export tax in order to redress the price balance and make its carrageenan output more viable for buyers by making production more expensive for its Chinese and Filipino competitors.

If this were to happen, Aregger said: “My prediction would be the one that would really suffer would be the Philippines because both China and the Philippines will have more expensive raw material but China would still have export subsidies so would basically still be competitive. The ones left behind would be the poor guys in the Philippines.”​     

He suggested the Philippines, despite producing its own raw material, relied heavily on imports because of volatile weather conditions that did not affect Indonesia in the same way due to location.

Tracing back

Niko Ariansyah, at the show representing two-year-old Indonesian firm Kappa Carrageenan Nusantara (KCN), said this shift would be beneficial for the farmer, producer and Indonesia as a whole.

He said the processing side of the industry was not only more valuable but more stable since seasonal pricing fluctuations for the raw material was less felt with the final product as the processed seaweed could be stockpiled. KCN was also working with farmers directly to standardise quality and cultivation practices.

He added that European buyers also stood to gain by simplifying their supply chains. A buyer could visit the grower in one part of Indonesia, then make a short trip to where the raw material was processed. “It’s good to have a one-spot location for everything you want.”

On the look out

KCN and the other Indonesian companies at the show were looking to establish links with European buyers, and Switzerland Global Enterprise was also organising buyer missions in May to facilitate this. Ariansyah said for his company a contract of a minimum of ten tonnes of carrageenan a month would be sufficient to begin with.

Aregger said that smaller firms where more direct trade was possible could be the way to go with this search.

“I would say from a business point of view, if I were an Indonesian exporter, I would go for the smaller European buyers because then it’s just a better business relationship. You’re kind of on the same level and not just, ‘You’re the big guy, I’m the small guy, please tell me what to do.’ You can look for a common solution. That would be my strategy.”

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1 comment

'Dramatic' carrageenan supply chain shake up...

Posted by Hans Porse,

Current production of tropical carrageenan
seaweeds is app 205.000 mts/dry of which
Indonesia produces app 125.000 mts/dry or 61 % - not 75 %.
Ongoing ASEAN market integration is also aiming at eliminating trade barriers including Indonesia and the Philippines

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