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View all search resultsIndustry urges palm oil output boost amid biodiesel uncertainty
Implementing B50 amid stagnant production could trigger a sharp rise in CPO prices and derivative products such as cooking oil, as well as reduce export volumes.
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Workers load oil palm fruit bunches onto trucks in PT Wanasawit Subur Lestari's plantation in Pangkalan Bun, Central Kalimantan, on Dec. 19, 2015. (JP/Dhoni Setiawan)
U
ncertainty over whether the government will raise the biodiesel mandate from the current 40 percent palm oil blend (B40) to 50 percent (B50) this year has led to volatility in global crude palm oil (CPO) prices. Even so, industry players are urging a renewed focus on expanding production capacity, arguing that stronger supply fundamentals would help cushion the impact of policy shifts and prevent trade disruptions.
On Jan. 14, Reuters reported that the government had scrapped plans to implement the B50 mandate this year due to “technical and funding concerns,” citing a statement from Deputy Energy and Mineral Resources Minister Yuliot Tanjung.
The news indicated that Indonesia, the world’s largest palm oil producer, would not divert a significant volume of global supply for domestic use and strain supplies. The market responded swiftly, with CPO futures prices in Malaysia falling from around 4,100 ringgit (US$1,015) per tonne to below 4,000 ringgit.
However, later that day, the ministry’s director general of new, renewable energy and energy conservation, Eniya Listiani Dewi, clarified that the deputy minister’s remarks should not be interpreted as a cancellation of the B50 program.
She acknowledged that the ministry’s decision to allocate Rp 47.2 trillion ($280 million) in incentives to produce 15.64 million kiloliters (kL) of biodiesel this year was still based on the B40 mandate. However, the ministerial decree also stipulates that adjustments will be made if the government changes the mandate, Eniya said.
“We are still preparing the technical requirements for the B50 mandate, with road tests for the automotive sector exceeding 10,000 kilometers,” she said in a statement.
Since then, CPO futures prices have rebounded to around 4,200 ringgit per tonne, as of Thursday.
