In response to Europe’s proposed ban on use of biofuels made from palm oil by 2021, Indonesia is considering to stop trading palm oil to Europe altogether.
Indonesia has commissioned a study on stopping palm oil exports to the European Union – in order to eradicate the risks of export uncertainties once and for all. The study is expected to provide a report by end of this year.
Europe is Indonesia’s second largest palm oil export market, and Indonesia shipped its highest value of palm oil ever in 2017, contributing to the year’s $12 billion trade surplus. EU imports around 5 million tons of palm oil only for making Nutella each year.
The decision on whether the palm oil use ban will be imposed in all EU country members is expected to be made in 2019. If banned, it will be a huge trade blow for Indonesia and Malaysia – the two of the largest palm oil exporters to the EU.
Meanwhile, palm oil production has grown in Indonesia with land used for palm plantation rising from only 4 million hectares in 2000 to 11.9 million hectares in 2017 – as per data from the Central Statistics Agency (BPS). The numbers are expected to increase to 13 million hectares by 2020.
In addition, palm oil exports and its derivative products reached $23 billion, up 26 percent from $18 billion in the previous year. Indonesia is also exporting more palm oil to other regions – with export volume of palm oil to African countries jumping nearly 50 percent to 2.3 million tons in 2017 from 1.5 million, while exports to Middle Eastern countries increased by 7 percent to 2.1 million tons from 1.9 million, the report showed.
China is another big market for Indonesian and Malaysian palm oil, especially after the threats of declining edible oil supply following its trade wars with the US. China is looking elsewhere and plans to increase palm oil imports from Indonesia by up to 500,000 tons per year. Already in 2017, China bought 3.73 million tons of Indonesian CPO compared to 3.23 million tons in 2016.
How will palm oil production and exports shape the biofuels and oleochemicals market? Learn more at CMT’s 6th Oleochemicals Outlook on 5-6 September 2018 in Bali.