3 April 2020 (closed)
USD/IDR (16,464) -277.01 -1.65%
EUR/IDR (17,872) -449.69 -2.45%
Jakarta Composite Index (4,623.43) +91.74 +2.02%
Update COVID-19 in Indonesia: 2,092 confirmed infections, 191 deaths (4 April 2020)
Indonesian crude palm oil (CPO) exports rose about 15 percent year-on-year (y/y) to 1.8 million tons in January 2015 from the same month last year. However, on a month-on-month (m/m) basis Indonesian CPO exports fell 8 percent in the first month of 2015. Fadhil Hasan, Executive Director at the Indonesian Palm Oil Producers Association (Gapki), said that CPO exports from Southeast Asia’s largest economy declined in January as demand from nearly all main CPO export markets, particularly China and India, fell at the year-start.
Other factors that contributed to Indonesia’s declining crude palm oil exports in January 2015 were large global stockpiles of edible oils (partly caused by worldwide low edible oil demand which has weakened to its lowest level since October 2009), low global oil prices, and fewer supplies of CPO to the biodiesel market. Recent floods in main CPO producing regions in Malaysia were unable to lift CPO prices. Hasan said that the average CPO price in January was USD $669.6 per metric ton (down 1 percent from the price in the preceding month). Indonesia’s benchmark CPO price for February 2015 (which is set by Indonesia’s Trade Ministry and is used to calculate the country’s CPO export tax) is USD $648 per metric ton. The Indonesian government sets a CPO export tax when this benchmark price (calculated using international and local CPO prices) exceeds USD $750 per metric ton (if the price falls below USD $750 per metric ton then a zero percent tariff is set). However, the government recently indicated that it may lower the USD $750 per metric ton threshold as palm oil prices have been below USD $750 per metric ton for four months implying that the government has not been able to collect any export tax income from this sector.
According to data from Gapki, exports of Indonesian CPO (and its derivatives) to China, the world’s second-largest economy, plunged 40 percent (m/m) to 196.8 thousand tons in January. Meanwhile, exports to India, the world’s largest CPO importer, fell 37.7 percent to 298.3 thousand tons. Slowing demand in these two vital CPO importing countries leads to pressures on CPO prices. Furthermore, Indonesian CPO exports to the USA fell 15 percent (m/m), to African countries by a total of 8 percent (m/m) and to the Eurozone by 3.6 percent (m/m). On the other hand, Indonesian CPO exports to Pakistan surged 59 percent (m/m) to 125.6 thousand tons in January 2015, while CPO exports to the Middle East rose about 9 percent (m/m) to 190.2 thousand tons.
Contrary to initial expectation, Indonesia’s recent decision to triple biodiesel subsidies to IDR 4,000 per liter (a move to support the country’s biodiesel companies as biodiesel prices are higher than diesel prices) is not expected to boost CPO demand significantly due to the large drop in crude oil prices since June 2014. Indonesia, the world’s largest palm oil producer, introduced an ambitious mandatory palm oil-based biodiesel program (known as B10) in 2013 in an effort to curb the country’s trade and current account deficits (primarily caused by costly oil imports). However, low crude oil prices in combination with logistical and infrastructure issues hinders full implementation of the program.
Indonesian Palm Oil Production and Export:
(million metric tons)
(million metric tons)
(in USD billion)
¹ indicates forecast
Sources: Food and Agriculture Organization of the United Nations, Indonesian Palm Oil Producers Association (Gapki) and Indonesian Ministry of Agriculture