Indonesia is unlikely to curb palm oil exports anymore and the South-East Asian country is likely to extend its export duty waiver beyond October 31, says Fadhil Hasan, Head of Trade and Promotion, Indonesia Palm Oil Association (GAPKI).

“We would like to assure our buyers that there will be no more ban or restriction on the export of palm oil. We are now good enough to meet the demand and are going to export more,” Hasan told BusinessLine in an online interview.  The GAPKI official is in India in connection with the Globoil Conference at Agra. 

Indonesia has allowed palm oil exports without any shipment levy till October 31. Initially allowed till August 31, it was extended. “We expect the Government to extend the duty-free exports,” he said. 

Changing market share

Asked about Indonesia palm oil producers meeting the domestic market obligations (DMO) to export the commodity, he said restrictions due to DMO were less. 

“We are looking to increase our share in the Indian market in the second half. We want the market share to change (in Indonesia’s favour),” Hasan said. 

Fadhil Hasan, Head of Trade and Promotion, Indonesia Palm Oil Association

Fadhil Hasan, Head of Trade and Promotion, Indonesia Palm Oil Association

During the current oil year (November 2021-October 2022), Malaysia has replaced Indonesia as the top supplier of palm oil to India exporting 2.98 million tonnes (mt) during the November-August period. Indonesia’s sale of palm to India was 2.17 mt, data from the Solvent Extractors Association of India (SEA) showed. 

During the 2020-21 oil year, Indonesia was the top exporter of palm oil to India, shipping 3.96 mt, while Malaysia exported 3.86 mt of palm oil to India. This year, Indonesia’s palm oil exports were affected after the Joko Widodo government banned palm oil exports from April 28 to May 23. 

Side-effects

The ban has resulted in a few other side-effects such as palm oil overflowing in Indonesian producers’ storage and the commodity’s prices crashing subsequently after the ban was lifted. Prices crashed mainly since Indonesia’s palm oil inventories topped 7.3 mt in June. 

“The inventories had declined to 6.6 mt in July and could drop to 5 mt by the end of the year,” Hasan said. 

Despite stocks being around 5 mt against the usual 3-4 mt in Indonesia, palm oil prices are likely to rule stable. “Though prices may move up and down in the short-term, they are going to rule stable. In Rotterdam, CIF (cost, insurance and freight) prices are currently around $1,075 a tonne and they will be stable around $1,100 levels,” the GAPKI official said. 

Palm oil prices had surged to over 7,000 Malaysian ringgits (MYR) on Bursa Malaysia Derivatives Exchange in May after the Indonesia ban on exports. But they dropped to a 14-month low of 3,450 MYR in September due to the start of the peak production season and high Indonesian inventories before recovering to 3,862 MYR currently. 

India buying more

“India has begun buying more palm oil from us. September purchases were good. We expect the higher purchases by India to continue,” Hasan said. 

Indonesia lost its market share in India due to the ban but it will make efforts to make it up. “We are going to change and compete to get a higher share,” he said. 

On the other hand, China’s purchases have been affected by its government policies to impose lockdowns due to the Covid pandemic. “Three months ago, China agreed to buy more palm oil from Indonesia. We expect it to buy more in the coming months,” the GAPKI official said.

Biodiesel blending

To a question, Hasan said Indonesia is unlikely to increase the share of palm oil in diesel blending. “We are not going to add much in the futures for blending since palm oil supply is an issue,” he said.

Indonesia’s palm production peaked at 47.2 mt in 2019 before dropping to 47.03 mt in 2020 and 46.9 mt last year. “Production this year will be lower than last year, though it is expected to increase in the second half compared with the first half,” the GAPKI official said. 

On increasing the area under oil palm plantations, Hasan said Indonesia’s policy restricted such expansion.

To a question on the formation of the Asian Palm Oil Alliance, he said he was not sure of its purpose but hoped it would strengthen the relations between producers and consumers. 

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