Indonesia will Restrict Palm Oil Exports to Secure its Domestic Supplies

Tanjung Priok: In an effort to ensure a sufficient domestic supply, Indonesia will tighten export regulations for Palm Oil beginning on January 1, 2023, by permitting fewer exports abroad for every tonne sold domestically. In contrast to the current ratio of eight times, which is allowed for exporters, the new regulation allows exporters to ship six times their domestic sales volume. This is confirmed by an industry official who primarily deals in Palm Oil exports. The imposing of the law would further support an increase in the price of Palm Oil globally.

The policy, often referred to as the domestic market obligation, compels Palm Oil exporters to sell a percentage of their supply to the domestic market before they can be granted a permit to export. Following Indonesia's relaxation of the export prohibition on Palm Oil, it was put into effect in late May of this year, shocking global markets and raising concerns about escalating food inflation.

Since output will be seasonally lower in the first quarter of 2023, the government wants to ensure a sufficient domestic supply throughout the Ramadan and Eid vacations in April. Additionally, Indonesia will enforce a stricter biodiesel blending requirement starting in 2023, which will raise domestic Palm Oil use. They are placing a ban because they do not want to risk a decrease in local supply and a rise in local costs. The world's largest producer of Palm Oil, Indonesia, is planning to sell less of the product abroad as it tightens a rule mandating businesses to stock up more domestically. In the worldwide market, prices would increase by more than the maximum percentage due to less trading from one of the global suppliers of the world.

According to the ChemAnalyst database, the price of Palm Oil will likely increase as Indonesia tightens Palm Oil Exports. Furthermore, there is a limitation for the domestic traders for selling their products in the global market, further limiting the sales of the product.