Bandung – The Indonesian Palm Oil Association (GAPKI) predicted that Indonesia’s palm oil exports this year will decrease, continuing the declining trend seen during the last few years. According to the Association, it is caused by the potential increase of domestic consumption if the government applies the mandatory program of biodiesel 40 percent (B40) as an upgrade of the current B35 program.
GAPKI projected that the domestic consumption of palm oil in 2023 reached 25.4 million tons, an increase of 9.08% from 23.28 million tons during the previous year. The domestic consumption was dominated by the consumption for biodiesel production at 11.6 million tons.
Based on the projection, GAPKI Media Relations Head Fenny Sofyan said that the increase of domestic consumption will result in the reduction of exports by 11.95% if the implementation of biodiesel program is upgraded from the current B35 to B40 mandatory program.
“The local consumption in 2024 is expected to grow by around 9.08% or around 2.0 million tons for production of biodiesel B40. So, the local consumption will rise from 25.4 million tons in 2023 to 27.4 million tons this year, while exports will drop by 13.95%,” Fenny said during the workshop of downstream palm oil industry journalists in Bandung, West Java, on Thursday (1/2/2024).
Fenny said that the palm oil exports have been declining since 2019. “In 2019, the export volume of palm oil products reached 37.4 million tons. Then it dropped to 34 million tons in 2020, and to 33.6 million tons in 2021, but slightly rose to 33.9 million tons in 2022. GAPKI projected that exports during 2023 were only at 32.9 million tons,” she said.
She pointed out that Indonesia’s export growth had been also stunted by the stagnant production of palm oil during the period of 2019 – 2022. But local consumption has been steadily rising, especially because of the mandatory biodiesel program.
“In 2023, the export drop was an unique case, as it was seen not as a result of stagnant production. It was due to the impact of Russia’s decision to sign the Black Sea Grain Initiative in 2022. This agreement opened a trade route so that grains and sunflower oil can be exported at cheap prices,” she said.
It resulted in export destination countries, such as China and India, being flooded with such commodities in 2023. The stocks of grains and sunflower oil in the two countries are predicted to run out after the celebration of Chinese New Year this month.
“In the Oil World, Pakistan consistently sees the decrease of palm oil exports from Indonesia is more as a result of China and India having high stocks, while production here is stagnant,” she said.
Fenny further said that the production of Crude Palm Oil (CPO) and Crude Palm Kernel Oil (CPKO) in Indonesia was stagnant during the last 4 years, while domestic consumption for foods, oleochemical and biodiesel has been continually rising.
“The El Nino in 2023 was expected to contribute to the reduction of production until this year, despite the fact that it is seen not so significant,” she said. (*)
Source: cnbcindonesia.com