According to the news report by Reuters, Indonesia’s push to increase its biodiesel mandate could strain global palm oil supplies, according to a leading industry analyst. The country, the world’s largest palm oil producer, currently requires a 35% palm oil-based blend in biodiesel but plans to raise that to 40% to reduce energy imports.
If the new mandate is implemented, it could push biodiesel consumption to 16 million kilolitres in the coming year. This would require an additional 1.5 to 1.7 million metric tons of palm oil, resulting in tighter export volumes, David Mielke, senior analyst at Oil World, said at a palm oil conference in Kuala Lumpur on Tuesday, the news report further added.
“Indonesia’s decision to increase the mandate by 5% will tighten supply overall,” Mielke told Reuters on the sidelines of the conference. “For global consumers, this would be catastrophic as it would mean even less oil available.”
The shift to a 40% blend, known as B40, would raise Indonesia’s palm oil use for biodiesel to 13.9 million metric tons, up from the estimated 11 million tons required under the current B35 mandate, according to Indonesia’s biofuel producers association, APROBI.
In recent years, palm oil production has been affected by several factors, including labor shortages, reduced fertilizer application, and erratic weather in Indonesia and neighboring Malaysia, which has worsened supply. However, Mielke expects production to rise by 2.3 million metric tons in the 2024/25 season, while rival soybean oil prices are expected to trade at a premium over palm oil by mid-2024.
As per the news report, Glenauk Economics managing director Julian McGill said palm oil prices are likely to hover around 4,000 ringgit ($933) per metric ton in 2025. Malaysian crude palm oil futures are currently trading at a six-month high, averaging 3,976.50 ringgit per ton this year.
Malaysia’s palm oil production is projected to increase to 19.4 million tons in 2024, compared to 18.55 million tons the previous year, McGill added. Meanwhile, Indonesia’s output is expected to fall by 1 million tons to 53.84 million tons.
