Indonesia’s palm oil exports are projected to decrease by 2 million tonnes this year, driven by increased domestic consumption linked to a higher biodiesel blending mandate and reduced production levels. Domestic demand for biodiesel is likely to increase further.
An industry official noted that the drop in exports from the world’s leading palm oil producer will likely support benchmark prices in Malaysia, as reported by Reuters on September 19.
Fadhil Hasan, head of the trade and promotion division at the Indonesian Palm Oil Association, indicated that exports could fall to 30.2 million tonnes in 2024 during the Globoil conference held in India from September 18 to 20.
In the first half of this year, exports declined by 7.6% year-on-year, totaling 15.06 million tonnes, Hasan highlighted. He also mentioned that production is anticipated to drop by 1 million tonnes, reaching 53.8 million tonnes, largely due to the adverse weather conditions last year, which impacted yields.
“There has been no improvement in productivity this year, nor any expansion of cultivated areas. We expect production to decrease by 1 million tonnes this year,” Hasan stated.
Indonesia has increased its palm oil blending mandate to 35% in 2023, with nationwide implementation beginning on August 1 of the previous year. This shift is set to boost domestic palm oil consumption from 23.2 million tonnes last year to a record 24.2 million tonnes in 2024.
Additionally, Indonesia’s energy ministry announced plans to escalate the biodiesel blending rate to 40% by January 2025, aiming to reduce fuel imports and lower fossil fuel emissions.
According to Hasan, rising domestic consumption will limit the surplus available for exports, which is crucial for funding the country’s biodiesel initiatives.
“The government must carefully evaluate production and export trends before increasing the blending mandate, as exports generate essential revenue for supporting the biodiesel program,” he cautioned.
