Indonesia's Thirst for Biodiesel May Undercut Global Palm Oil Supply

by Nur Yasmin and Ridho Syukra (Jakarta Post) The Indonesian Palm Oil Association, or Gapki, said on Monday that Indonesia is likely to use up 8.3 million tons of palm oil to meet domestic demand for biodiesel this year, raising concerns there won't be enough palm oil left to export.

The government began mandatory use of B30 – diesel fuel made up of 30 percent biofuel from palm oil – last month and is already preparing to use the upgraded version, B40, next year.

"Domestic demand for palm oil in 2020 is estimated to reach 8.3 million tons to be processed into biodiesel, which may reduce heavily the amount of palm oil available for export," Gapki's executive director, Mukti Sardjono, said in a statement on Monday.

On the production side, Gapki said expected favorable weather may help the country produce a higher output than last year.

Exports – despite the adverse effects of the United States-China trade war, India's tariff discrimination and the European Union's biodiesel ban – still managed an increase of 4 percent to 36.2 million.

Gapki said the coronavirus outbreak in China is likely to hamper Indonesia's palm oil exports there.

The world's second-largest economy was Indonesia's largest CPO and kernel palm oil market, buying a total of 6 million tons last year ahead of India (4.8 million tons) and the European Union (4.6 million tons).

China was also the biggest buyer of Indonesia's oleochemical and biodiesel products.

"I hope the coronavirus outbreak will not last too long since all export activities to China have been stopped temporarily," he said.

Indonesia could still take confidence in the increase in CPO demand in other markets like Africa, which imported 2.9 million tons of palm oil products last year, up 11 percent from 2018. READ MORE