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Issue #588

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Intermodalism

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2014 Media Kit
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TFS eyes Indian sandalwood growth in Australia

By: | at 08:00 PM | Channel(s): International Trade  

Australia’s TFS Corp , the largest grower of Indian sandalwood outside of India, plans to acquire a second planting site in Western Australia to expand by four times its capacity for growing the valuable aromatic tree.

TFS, which produces sandalwood oil for fragrance makers such as Estee Lauder and Givaudan, is scouting for an 11,000-hectare (27,182-acre) site near its existing 2,500-ha sandalwood estate in Kununurra, on the northern side of Western Australia, company official Andrew Johns said.

“It has to be close to the area we are in now as we need the same kind of hot, arid temperature and soil conditions for the new plantation,” Johns, who is head of institutional investments at TFS, told Reuters during a business trip to New York last week.

He said TFS expects to pay up to A$110 million ($101 million) for the new planting ground.

The project will be similar to the one at Kununurra, where TFS owns 30 percent of the plantation and investors the rest.

Institutional investors at Kununurra paid up to $100,000 for an hectare plus maintenance costs. Smaller-scale investors paid less but agreed to share their harvest with the company.

Johns did not say if TFS had shortlisted any site for the new plantation.

But he said it was pertinent for the company to widen its landbank. “What we have is good for another two to three years of planting, after which we’ll have to look for a bigger site if we want to expand,” he said.

The sweet-smelling Indian sandalwood—which goes by the scientific name santalum album—is one of the world’s most illegally logged plants and has been listed as a vulnerable species by the International Union for Conservation of Nature.

Prices of tropical hardwoods vary according to age and dexterity and it is hard to find consistent market quotes.

According to TFS’ records, prices of Indian sandalwood have risen by a compounded 21 percent rate over the last 17 years. A tonne of the wood fetched $138,000 at a state forestry auction in South India in November 2008, TFS said.

In comparison, Burmese teak shipped illegally to China in 2004 was worth about $250 million for a million cubic metres, or about $7,000 a tonne, according to London-based environmental group Global Witness.

Johns said TFS will harvest in three years its first sandalwood from Kununurra’s oldest trees, which will be 14 years old by that time.

Each tonne harvested would be worth about A$1 million in total for its wood and oil, he said.

Johns said TFS acquired Mount Romance, a distiller of sandalwood oil, in 2008 to get into the aromatic oils business ahead of the Kununurra harvest. The unit supplies sandalwood oil to Estee Lauder and its associated brand Aveda, as well as other fragrance makers such as Givaudan and Lush.

Sandalwood is also extensively used in India for making incense, objects of worship, artistic carvings and furniture.

“A really nice piece of wood used for carving can be sold for as much $400,000,” Johns said. “There are some instances where you wouldn’t bother extracting the oil but sell the wood straight into the wood market.”

The plant can be turned into medicine and mint too.

TFS has a deal to supply sandalwood oil to Texas-based biotechnology firm ViroXis Corp, which is working on a topical treatment for viral skin infections.

It also has a tie up with Dubai’s Emirates Investment Group to sell in India mouth fresheners made from an edible form of sandalwood. (Reuters)