Lang
CIMB Securities Sdn Bhd said Indonesia's domestic palm oil consumption could rise by around 3 million tonnes if the government implements the B50 biodiesel mandate.
The firm noted that this potential increase represents about 6.2% of Indonesia's estimated crude palm oil (CPO) production for 2024, which stands at 48.2 million tonnes, according to data from the Indonesian Palm Oil Association (GAPKI).
"We believe that if B50 is implemented in Indonesia, it would be supportive of CPO prices in 2026, as the additional demand is likely to offset the negative impact of higher US tariffs on palm oil imports (19% for Indonesia and 25% for Malaysia, effective from 1 August 2025)," the firm added.
Eniya Listiani Dewi, Director General of New and Renewable Energy at Indonesia's Ministry of Energy and Mineral Resources, said the government is currently assessing the feasibility of raising the biodiesel blending ratio to 50% under the B50 programme.
However, no final decision has yet been made on implementing B50 in 2025, as the government continues to consult with experts and assess the availability of raw materials and manufacturing capacity. The ministry said that supporting the potential rollout would require five new biodiesel production facilities, three of which are currently under construction.
CIMB Securities expressed optimism about the implementation of the B40 programme in Indonesia, which appears to be on track to meet its 2025 targets.
The firm explained that B40 is expected to increase Indonesia's domestic palm oil consumption by 2 million tonnes, reducing the surplus available for export.
"We are also encouraged by the availability of funding to support biodiesel. According to the data, of the 15.62 million kilolitres allocated, 7.55 million kilolitres (48%) have been allocated to public service sectors such as public transport, which are fully subsidised," the firm added.
The remaining 8.07 million kilolitres will be sold at market prices without subsidy, which explains why subsidised biodiesel consumption (3.5 million kilolitres) is lower than total consumption.
The firm sees the implementation of B50 as a key factor to watch, as it could constrain Indonesian palm oil exports in 2026.
According to estimates from the Indonesian Biofuel Producers Association (APROBI), the implementation of B50 would raise annual biodiesel demand from 15.6 million kilolitres under B40 to around 19 million kilolitres, while Indonesia's Ministry of Energy estimates the requirement at around 19.7 million kilolitres to run B50.
To achieve this target, Indonesia would need to add new production facilities, as current production capacity stands at around 19.6 million kilolitres.
Meanwhile, CIMB Securities noted that Malaysia set its August CPO reference price at 3,864 ringgit per tonne, which raised the palm oil export duty to 9%, compared with 8.5% in July.
The firm added that the combination of Malaysia's higher export duty and the increase in US tariffs from 10% to 25% could lead to higher palm oil exports in July, potentially supporting CPO prices in the near term.
The firm concluded: "We maintain our average CPO price forecast at 4,200 ringgit per tonne for 2025, and continue to rate IOI Corporation Bhd and Hap Seng Plantations Holdings Bhd as our top picks in the plantation sector."
Source: Al Mal Forum