Indonesia to enact mandatory B35 biodiesel program as global CPO prices fall

  • The Energy and Mineral Resources Ministry is to start implementing the mandatory 35 percent biodiesel (B35) program for all biofuels by the end of Jul 22 amid the global decline in crude palm oil (CPO) prices.
  • Dadan Kusdiana, the ministry’s renewables director general, explained that the B35 biodiesel program was part of the government’s efforts to boost the domestic use of palm oil to help raise CPO prices.
  • Increased demand would lead to higher prices, Dadan said. “This is to help raise the prices of fresh fruit bunch [FFB], which are currently falling. This is a national policy, not just the energy ministry’s policy.”
  • He also said ministry would not be testing the B35 biodiesel on the road. Higher global production of vegetable oils is expected to drive down average CPO prices from USD1,500 per ton in 1H22 to below USD1,000 per ton in 2H22, according to a Fitch Ratings report released in Jun 22.
  • CPO prices have dropped by more than USD300 per ton since early Jun 22, following the government’s policy shift to encourage exports by cutting levies on the commodity.
  • “Issues concerning FFB prices cannot be [disclosed] at the present time, because we also have to consider developments,” Coordinating Maritime Affairs and Investment Luhut Binsar Pandjaitan said, referring to upstream shipping problems.
  • Indonesia, which contributes around 60% to the global palm oil supply, launched a program this week to ship at least 1 million tons of CPO and derivative products by the end of Jul 22.
  • But red tape has hampered the program. In an attempt to meet the export target, the government has allowed companies that are not part of the domestic market obligation (DMO) to export the commodity, provided they paid an additional USD200 per ton on top of the export tax and other relevant fees.
  • It has also cut the maximum levy on CPO exports from USD575 to USD488 per ton in a bid to free up FFB stockpiles and encourage refiners to start purchasing from farmers again.

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