Jakarta: The world's vegetable oil supplies, already under pressure from lower production in Southeast Asia and Latin America, are expected to be further squeezed by an Indonesian initiative to restrict shipments of Palm Oil and increase domestic biodiesel consumption. Additionally, edible oil consumers-particularly price-conscious consumers in South Asia and Africa-would, bear the brunt of the supply-side limits that materialize just as demand is anticipated to rise as China relaxes COVID-19 controls and India ramps up imports.

The worldwide Palm Oil supply and demand scenario will undoubtedly alter in 2023 when Indonesia implements the B35 mandate, and for the time being, it is anticipated that there will be a modest shortfall in the global Palm Oil supply and demand. The strictest B35 rule in the world, which applies to Indonesia, requires that all diesel sold there starting in February must contain 35% palm-based fatty acid methyl ester. Other nations have laws requiring single-and double-digit percentages of bio content for diesel or gasoline, while Malaysia has partially implemented a 20% biodiesel blending mandate.

Indonesia, which provides more than half of the world's Palm Oil, also tightened trade regulations this year. Exporters are now only permitted to ship six times as much Palm Oil as they sell domestically, down from an expected ratio of eight times in the fourth quarter of 2022. There will undoubtedly be a decrease in Indonesian Palm Oil exports as domestic consumption rises and output falls.

According to the most recent market report, in 2022, Indonesia produced 51 million tonnes of Palm Oil, of which 34 million were exported. 26 million tonnes of exports and 50.5 million tonnes of production of Palm Oil are anticipated in 2023. Additionally, Malaysia stated that it might halt exporting Palm Oil to the European Union in reaction to a new EU regulation that rigorously controls the sale of the commodity to safeguard forests.

The ChemAnalyst predicts that as the Indonesian government pursues its ambitious biofuel initiative in its domestic market to replace diesel, the price of Palm Oil will certainly rise.