"Too Much Increase"... Indonesia Surprised by Palm Oil Stock Surge, Expands Export Volume

Significant Increase in Palm Oil Inventory and Sharp Drop in Price of Oil Palm Fruit, the Raw Material for Palm Oil
Domestic Supply Obligation Policy Continues to Be Maintained

Concerns over disruptions in cooking oil supply continue due to Indonesia's restrictions on palm oil exports, leading some warehouse discount stores to limit the quantity of cooking oil that can be purchased per person.
[Image source=Yonhap News]

[Asia Economy Intern Reporter Kim Nayeon] Indonesia is set to resume palm oil exports just one month after imposing a ban on palm oil exports in April due to a cooking oil shortage.

The decision to expand export volumes came as domestic palm oil stockpiles surged due to market regulations, causing the price of oil palm fruit, the raw material for palm oil, to plummet.

According to foreign media on the 2nd (local time), Indonesian Senior Minister Luhut Panjaitan stated in a press release that he requested the Ministry of Trade to raise the export volume limit for palm oil companies from five times the domestic sales volume to seven times, effective from the previous day. This indicates a partial easing of export restrictions that were introduced due to rising international palm oil prices.

Palm oil is widely used not only as cooking oil but also as an ingredient in various foods such as ramen, snacks, and chocolate, as well as in cosmetics and detergents.

Indonesia, which accounts for about 60% of the world's palm oil production, imposed a palm oil export ban in April amid the cooking oil shortage but has now resumed exports after one month.

However, the domestic supply obligation policy, which requires maintaining a certain proportion of domestic supply for exports, remains in place.

Nevertheless, the surge in stockpiles has severely impacted oil palm producers.

According to the Indonesian Palm Oil Association (GAPKI), palm oil exports in April were 2.089 million tons, down more than 20% compared to a year earlier. Meanwhile, stockpiles as of the end of April reached 6.103 million tons, nearly a 90% increase from a year ago.

Since September 2018, Indonesia has mandated the use of biodiesel 'B20,' which blends 20% crude palm oil (CPO) with diesel, in all diesel vehicles and machinery.