Higher biodiesel mandates in Indonesia set to curb palm oil supplies

Indonesia is planning to increase its biodiesel blending mandate from 35% to 40%, leading to a projected rise in biodiesel consumption by 1.5-1.7 million tonnes and potentially reducing palm oil export volumes. This could result in a tighter palm oil supply globally, as Indonesia is the world's largest palm oil producer and the move would boost its palm oil use for biodiesel. However, falling crude oil and soybean oil prices have reduced the appeal of biofuels, leading to a drop in palm oil prices. Despite this, the palm oil sector remains robust, with increasing exports and signs of weaker production in Malaysia.

The introduction of higher biodiesel blending mandates by Indonesia is likely to tighten palm oil. Indonesia – the world’s leading palm oil producer – currently has a mandatory 35% blend of palm oil in biodiesel (B35) and is looking to increase this up to a 40% blend (B40) in a bid to reduce its energy imports. If implemented, the move could lead biodiesel consumption to rise to 16M kilolitres next year, the 8 October report said. In addition, the proposal would involve an extra 1.5M- 1.7M tonnes of palm oil, leading to lower export volumes, Oil World senior analyst David Mielke told a palm oil conference in Kuala Lumpur. “In a situation where we don’t have enough oil, Indonesia increasing the mandate by 5% would make overall supply tight,” he told. “For the consumer worldwide, it would be catastrophic because there would be even less oil available.” According to estimates by Indonesia’s biofuel producers’ association APROBI, B40 will boost the country’s palm oil use for biodiesel ...