Indonesian Palm Oil Industry Diversifies Due to Unstable US Trade

According to industry leaders, Indonesian palm oil companies, the world’s leading suppliers, are actively exploring new markets in Europe, Africa, and the Middle East to mitigate potential losses from US tariffs.

Despite a temporary 90-day pause in implementing the 32% tariffs, significantly impacting Indonesia’s exports, the sector is diversifying to ensure long-term stability.

The chairman of the Indonesian Palm Oil Association (GAPKI), Eddy Martono, acknowledged the reprieve as an opportunity for negotiation but stressed the necessity of market diversification.

With the US being a major importer, consuming 2.5 million tonnes in 2023, Indonesian producers are concerned about maintaining their 89% market share, especially as Malaysian competitors face lower tariffs.

The potential tariffs have prompted Indonesia to consider increasing exports to Egypt, the Middle East, Central Asia, and Eastern Europe. While Finance Minister Sri Mulyani has reduced crude palm oil export taxes to enhance competitiveness, smallholder farmers, numbering 2.5 million, remain anxious about the long-term impact.

The chairman of the Palm Oil Farmers Union (SPKS), Mansuetus Darto, warned that without a trade agreement, overcapacity and harvesting issues would arise.

President Prabowo Subianto is pursuing negotiations with the US, sending a delegation to Washington, and exploring increased purchases of US liquefied natural gas and petroleum gas to balance trade.

The industry remains hopeful for a favourable resolution with the US but is prepared to shift its focus to alternative markets if necessary.

The temporary pause has provided a window for negotiation, which the Indonesian government is urged to utilize to its fullest potential.

Tags: tariffs, exports, Indonesia, Europe, US, Middle East, palm oil, Africa, markets