Palm Oil Prices are Likely to Increase in the Global Market Due to Low Exports from Indonesia

Jakarta: The Indonesian Palm Oil Association (IPOA) anticipates that this year will continue last year's fall in Palm Oil exports, which has been linked to an unstable regulatory environment and disrupted output. Indonesia's leading producer of Palm Oil in the world exported 30.8 million tonnes of Palm Oil goods in 2022, a decrease of 8.4 percent from approximately 32.7 million tonnes the previous year. Lower exports were also a result of a modest decline in Palm Oil production last year and growing domestic energy use.

Due to an increase in fuel use after the pandemic, biodiesel use will increase in 2022. Under the B20 program mandates a blend of 20% biodiesel with 80% petroleum-derived diesel, Indonesia made Palm Oil a necessary feedstock for Gasoline in 2016. This was done to limit the amount of diesel imported. Under the B30 program, which entered into force at the beginning of 2020, the required biodiesel contribution was increased to 30 percent; in February of this year, it will be increased to 35 percent.

Given the potential for other importing nations, such as China, to absorb exported goods, it is feasible that the government will maintain the export volume multiplier ratio despite weakening demand in Europe and India. Government policy determines Crude Palm Oil (CPO) export volume policy, which will undoubtedly take the B35 program into account when making decisions about CPO export volume policy.

According to the Trade Ministry of Indonesia, which specifies the multiplier ratio to determine the export part of CPO and its derivative products, it has established the ratio of export volume for CPO and derivative products at 1:6, which is lower than the previous ratio of 1:8. The order became operative on January 1st, 2023.

According to the ChemAnalyst database, the price of Palm Oil is likely to increase due to a decrease in export volume from major exporting countries, primarily Indonesia.