Higher biodiesel requirements could undermine Indonesia’s palm oil exports in 2025

Indonesia’s palm oil exports in 2025 are likely to fall 7.3 percent year-on-year to 27.35 million metric tons despite rising production as the world’s largest edible oil producer ramps up biodiesel output, a senior industry official said Wednesday.

Fadhil Hasan, head of trade and promotion at the Indonesian Palm Oil Association, said in a presentation that the country’s crude palm oil production is likely to rise to 50 million metric tons in 2025 from 48.16 million metric tons a year earlier.

“The growing biodiesel mandate is reducing the surplus for export, and this trend will continue,” he said.

Indonesia expects its B40 biodiesel program, aimed at reducing the country’s dependence on imported diesel, to be fully implemented next month after delays earlier this year.

The country launched the mandatory B40 blend containing 40% palm oil from January 1, but faced some delays due to regulatory issues. Fuel distributors were given until the end of February as a transition period.

Previously, the blend contained 35% palm oil.

The increased use of palm oil, the most widely used edible oil in the world, has reduced supplies and raised prices, making it more expensive than competing products such as soybean oil.

Indonesia’s consumption of palm oil for biodiesel production is likely to rise to 13.6 million tons in 2025 from 11.44 million tons a year earlier, Fadhil said.

The country, which is the world’s largest palm oil producer, finances its biodiesel program by imposing an export levy, which is used to subsidize biodiesel for consumers.

However, the government has decided to subsidize about half of the biodiesel allocated for 2025. “Indonesia does not need to revise the export duty to fund its B40 program,” Fadhil said.

The plantation fund is expected to allocate Rp 35.47 trillion (US$2.2 billion or 9.7 billion ringgit) to subsidize the country’s mandatory biodiesel program, Energy Ministry spokeswoman Enya Listiani Dewi told MPs.

Tags: Indonesia, palm oil