Market uncertainty caused by Indonesian B40 palm oil delays
Indonesia is yet to implement the higher blend of biodiesel that was planned for January 1, as industry participants are awaiting technical details of the regulation. This has caused confusion among palm oil dealers.
The government pledged that it would mandate a 40% blend of palm oil in biodiesel starting Jan. 1. This is known as B40. It will replace the current 35% blend.
The benchmark March palm oil contract on the Bursa Derivatives Market closed at 4,336 Ringgit ($968.72), down 2.5%, amid uncertainty over B40 implementation. It had risen earlier by about 1.8% when it tracked gains for Dalian vegetable oils.
Malaysia's benchmark palm-oil contract has risen by nearly 20% since 2024, as a result of the plan to increase biodiesel in its blend. This is due to lower palm oil exports expected from Indonesia.
Pertamina Indonesia, the state-owned energy company that operates the largest petrol station network in the country, and the biodiesel producer group APROBI, said on Thursday they were awaiting the official decrees to sell the fuel.
Once the regulations are issued, it will give time for the transition. We have already prepared Plaju refineries and Kasim refineries to process B40," Pertamina's spokesperson Fadjar Santoso stated.
Ernest Gunawan, secretary general of APROBI, said that members cannot sign contracts for the distribution of biodiesel without a government decree.
Edi Wibowo said that the director of bioenergy in the Energy Ministry was waiting for further instructions on B40. He did not provide any more details.
The energy ministry's senior officials did not answer questions about B40 implementation.
The palm oil industry had anticipated a gradual rollout.
Palm oil traders wait for Indonesia to announce the official amount of biodiesel it will distribute to fuel retailers in order to determine how their exports will be affected.
Officials in Indonesia have said that the country intends to allocate 15,62 million kilolitres of palm oil-based B40 fuel by 2025.
Analysts worry about the plans to subsidise only B40 for non-industrial uses, which represents less that half of the demand in the country.
Anilkumar bagani, the head of research for Mumbai-based Sunvin Group's vegetable oil brokerage firm, said that there are obstacles to the bullish sentiment because (market participants) are not yet convinced about the fate of Indonesian B40 Biodiesel Policy success. ($1 = 4.4760 ringgit) Reporting by Fransiska Naangoy, Bernadette Cristina Munthe, Dewi Kuritawati, and Susan Fenton; editing by Mrigank Dahniwala.
(source: Reuters)
