The Reflection on Palm Oil Industry in 2019 and Prospect for 2020

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Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI)

The Reflection on Palm Oil Industry in 2019 and Prospect for 2020

Reflection for 2019

The year of 2019 has been a challenging year for Indonesian Palm Oil Industry. The Implementation of RED II by EU has removed palm oil from the raw material of biodiesel, the increase on import duty cost for Indonesian Palm Oil product to India, prolonged drought, the US – China trade war and constant decline on the price of CPO are the main challenges faced by Palm Oil Industry in 2019.

The trade war between two nations has constrained the export of soy from the US to China. This event has drove many farmers in USA to search for alternate markets that led to the decline on the oilseed and other vegetable oil’s price.

However, there’s an important event that happened in 16 August 2019, in which President Jokowi made a statement in his speech that Indonesia will consume more palm oil for domestic needs, especially biodiesel. As a result the average KPBN price for CPO kept jumping from USD 483, 497, 582, and 651 per ton on the period of September-December 2019.

The production of CPO in 2019 has reached 51,8 million ton or about 10% higher from the production in 2018. At the same time, domestic consumption has risen to 24% or 16,7 million ton with the increase of biodiesel consumption by 49%, food went up for 14% and increase in oleochemical for 9%. The export volume in palm oil for 2019 is 35,7 million ton, which is a 4% increase from 2018 export.

The export price for palm oil product, especially oleochemical and biodiesel in 2019 have been reported to reach 19 billion USD. The current export price is 17% lower than the export in palm oil product on 2018 with a total of 23 Billion USD.

Aside from oleochemical and Indonesian biodiesel, the main export destinations of palm oil in 2019 are China (6 million ton), India (4.8 million ton), EU (4.6 million ton). In the category of oleochemical and biodiesel, the biggest export destinations are to China (825 thousand ton) followed by EU (513 thousand ton). The rising trends on Indonesian palm oil export to Africa with an increase in 11% on 2019 from 2,6 million ton on 2018 to 2,9 million ton gives a positive sign for the Indonesian palm oil market.

The challenging year of 2019 was ended with a price that jumped above USD 800/ton CIF Rotterdam and the adjustment of import duty for Indonesian palm oil product export in India. For the planters, the brighter financial situation should have been seen as a chance for funding their plant and infrastructure restoration where their progress have been halted during the fall in commodity’s price .

The preparation for B30 implementation at the end of 2019 had created a worry among the importers regarding the possible decline in Indonesian palm oil supply for export.

Prospect for 2020

With a better climate condition and a higher price for the commodity, the beginning of 2020 has been a good start for Indonesian palm oil. According to the Indonesian Meteorology, Climatology, and Geophysical Agency, the climate (BMKG) in 2020 would have become more stable compared to 2019. The dry season is predicted to start in the month of April-May.

The government commitment in the implementation of B30 on 2020 showed the world that Indonesia is very commited and thus the impact on world’s vegetable oil market and the domestic oil marker would be unstoppable. In 2020, the domestic needs for biodiesiel is predicted to reach 8,3 million ton, thus affecting the number of palm oil supply available for import.

Despite of the unstable world’s economic condition in 2020; heated political situation in middle east, the prolonged US-China trade war, EU’s sustainability demand; the rising domestic biofuel consumption, the increasing number of ISPO certified company and the opening of new export destinations would guarantee the Indonesian palm oil in global market, thus GAPKI views the prospect of Indonesian palm oil industry with a positive outlook.

With the challenges available on the international and Indonesian market in mind and the business situation that demands a higher number of investments, the palm oil stakeholder’s work program in 2020 needs to focus more on:

1. The increase in productivity by the evaluation of production technic or replanting.
2. Pushing for the implementation in sustainability/ISPO
3. Aiming for new export destinations and managing the trading obstacles in the global market.
4. Spreading positive palm oil campaigns directed towards Indonesian and other countries targeted for palm oil export.

By paying attention to the opportunities and challenges faced in 2020 along with the government’s support for the palm oil industry, GAPKI is optimistic that by 2020 the palm oil industry will be better than 2019.

Jakarta, February 26 2020
Indonesian Palm Oil Association (IPOA)

More informations, contact:

Ir. Mukti Sardjono, M.Sc
Executive Director of IPOA
Phone. 021-57943871
Fax. 021-57943872