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CGS-CIMB Securities has said a renewed biodiesel push by Indonesia could support higher palm oil prices and prompt investors to re-rate plantation company stocks.
According to the research house's estimates, the B50 biofuel mandate, which requires a 50:50 blend of palm-based methyl ester and petroleum diesel, could consume an additional four million tonnes of crude palm oil. The research house said that if implemented, this would tighten palm oil supply, supporting higher prices.
CGS-CIMB Securities said: "The planned rollout of B50 represents a structurally positive factor for crude palm oil (CPO) prices, and if fully implemented, could trigger a re-rating of plantation stocks."
Indonesia, the world's largest palm oil producer, plans to roll out the mandate by the second half of 2026 following the success of the B40 programme, in a bid to boost energy security, reduce reliance on diesel imports and strengthen domestic demand for edible oil.
The B50 programme is currently in its final trial phase, which includes testing the fuel on ships, trains, heavy machinery and vehicles.
CGS-CIMB Securities said demand could rise by around 5% of total 2024 consumption, but warned of the risk of potential delays in implementing B50, including due to insufficient funding to support the programme, inadequate biodiesel production and blending capacity, and food security concerns.
Palm oil, used in everything from lipstick to infant formula, has risen more than 23% from its May lows, buoyed by strong demand from top importers India and China, as well as concerns over unfavourable weather curbing supply.
Bursa Malaysia's plantation index, which tracks 41 stocks in the sector, has risen 8% over the same period.
Source: The Edge