Palm Oil Local Demand Offsets Sluggish Global Market

The Indonesian Palm Oil Association (GAPKI) reported that the rising domestic demand can compensate the sluggish exports to several countries which have been affected by the outbreak of Coronavirus Disease 2019 (Covid-19).

GAPKI Executive Director Mukti Sardjono said on Thursday the total local consumption of palm oil is still positive amid the implementation of the large scale social restriction (PSBB) to stop the spread of Covid-19 pandemic. The rising local demand was mostly driven by the increase of oleo-chemical demand at 31.4 percent as it is used as the raw material to produce a number of health products to help fight the pandemic, and biodiesel demand at 23.2 percent as the government has been consistently implementing the mandatory program of biodiesel 30 percent (B30).

“CPO price decreased  from the average  US$564 per ton in April 2020 to US$526 per ton-Cif Rotterdam in May 2020,” Mukti said in a press release issued on Thursday.

He said that compared to April 2020, crude palm oil (CPO) production in May dropped by 1.9 percent to 3,616 thousand tons, domestic consumption dropped by 1.6 percent to 1,380 thousand tons, exports decreased by 8.3 percent to 2,428 thousand tons.

He said that its export value decreased by US$165 million from USD1.64 billion to USD1.47 billion in May. If compared to January-May 2019, production of CPO and PKO during January-May 2020 reached 19,001 thousand tons or a decrease of 14 percent, local consumption reached 7,334 thousand tons or an increase of 3.6 percent, export volume reached 12,736 thousand tons or a decrease of 13.7 percent. But its export value increased from US$7.995 million to USD8.437 million.

He said that the lower production in May 2020 compared to that of April 2020 was possibly caused by the lingering effect of long dry season in 2019.

According to him, the decrease of exports was mainly seen in the refined palm oil, which was generally resulted from the price spread between palm oil and soybean. “The largest export decrease in May was seen in the export to China at 87.7 thousand tons (-21%), to EU at 81.5 thousand tons (-16,62%), to Pakistan at 47 thousand tons (-23,4%) and to India at 38.6 thousand tons (-9,2%).”

“The export drop to China was possibly caused by the significant increase of crushing oilseeds (particularly soybean) so that China had a high supply of vegetable oils,” he said.

But he noted that exports to several other countries increased. Those countries include Egypt which saw an export increase of 42 thousand tons or an increase of 81 percent from its export in April 2020; Ukraine at 31 thousand tons (+99%), Philippines at 29 thousand tons (+73%), Japan at 19 thousand tons (+35%) and to Oman at 15 thousand tons (+85%).

Mukti said that economic activities in China, India and many other countries have been recovering, so that demands for vegetable oils will increase to meet their local needs for food, health products, biodiesel, personal care products, and other palm oil based products.

“Indonesian economic activities have also started recovering, so that local demand for palm oil will increase to meet the local needs,” he added. (*)