KUALA LUMPUR, Oct 8 (Askume) – Higher biodiesel mandates in Indonesia, the world’s biggest palm oil producer, could lead to a shortage of vegetable oil supplies, a leading industry analyst said on Tuesday.
Indonesia currently mandates biodiesel containing 35% palm oil-based fuel and is seeking to increase biodiesel containing 40% palm oil to reduce energy imports.
If the plan is implemented, biodiesel consumption could rise to 16 million kilolitres next year.
Oil World senior analyst David Mielke said at a palm oil conference in Kuala Lumpur that the move would involve the use of an additional 150,000 to 1.7 million tonnes of palm oil, resulting in lower export volumes.
“At a time when we don’t have enough oil, Indonesia’s approval of a 5% hike will put pressure on overall supply,” he told Askume on the sidelines of the event.
“So that would be devastating for consumers around the world because there would be less oil available.”
The Indonesian Biofuel Producers Association, APROBI, estimates that B40 and B35 will increase the use of palm oil in Indonesian biodiesel to 13.9 million tonnes from an estimated 11 million tonnes this year.
In recent years, global palm oil supplies have been hit by falling production in Indonesia and Malaysia, the world’s two biggest exporters, severe labour shortages due to the pandemic, lower use of expensive fertilisers and persistent rainy seasons.
Palm oil output is expected to rise by 2.3 million tonnes in 2024/25 compared with the previous season, Mielke said, while rival soybean oil is expected to be priced at a premium to palm oil by June next year.
Palm oil could trade at about 4,000 ringgit ($933.49) a tonne by 2025, said Julian McGill, managing director at Glenoak Economics.
Malaysian benchmark crude palm oil futures are currently trading at a six-month high. The average price so far this year is 3,976.50 ringgit per tonne.
The country’s palm oil output is expected to reach 19.4 million tonnes in 2024, up from 18.55 million tonnes in 2023, McGill said.
He also said that Indonesia’s production in 2024 may be 1 million tonnes less than last year.
Indonesia’s production is expected to reach 54.84 million tonnes in 2023, according to the Indonesian Palm Oil Association.
(This story has been corrected to attribute Indonesian production figures in paragraph 14 to the Indonesian Palm Oil Association, not Julian McGill)
