Analysis-The end of cheap palm oil? Output stalls as biodiesel demand surges

Rajendra Jadhav, Bernadette Christina and Ashley Tang

Sun, Mar 9, 2025, 4:06 PM 4 min read

By Rajendra Jadhav, Bernadette Christina and Ashley Tang

KUALA LUMPUR/JAKARTA (Reuters) - Prices of cooking lipid could beryllium buoyed up for years by stagnating accumulation and a biodiesel propulsion successful apical shaper Indonesia that are making traditionally inexpensive thenar lipid costlier, eliminating an vantage that besides curbed prices of rival oils.

Used successful everything from cakes and frying fats to cosmetics and cleaning products, thenar lipid makes up much than fractional of planetary rootlike lipid shipments and is particularly fashionable among consumers successful emerging markets, led by India.

After decades of inexpensive thenar oil, acknowledgment to booming output and a conflict for marketplace share, output is slowing and Indonesia is utilizing much to marque biodiesel, respected manufacture expert Dorab Mistry said.

"Those days of $400-per-ton discounts are gone," added Mistry, a manager of Indian user goods institution Godrej International. "Palm lipid won't beryllium that inexpensive again arsenic agelong arsenic Indonesia keeps prioritising biodiesel."

Indonesia accrued the mandatory premix of thenar lipid successful biodiesel to 40% this year, and is studying moving to 50% successful 2026, arsenic good arsenic a 3% blend for pitchy substance adjacent year, arsenic it seeks to curb substance imports.

The biodiesel propulsion volition trim Indonesia's exports to conscionable 20 cardinal metric tons successful 2030, down a 3rd from 29.5 cardinal successful 2024, estimates Eddy Martono, president of the southeast Asian nation's largest thenar lipid association, GAPKI.

Jakarta's biodiesel mandate, coupled with little accumulation due to the fact that of floods successful neighbouring Malaysia, has already lifted thenar lipid prices supra rival soyoil, prompting buyers to chopped purchases.

In India, the largest purchaser of rootlike oils, crude thenar lipid (CPO) has commanded a premium implicit crude soybean lipid for the past six months, sometimes exceeding $100 per ton. As precocious arsenic precocious 2022, thenar lipid traded astatine discounts of much than $400.

Indians were paying $1,185 a ton for crude thenar lipid past week, up from little than $500 successful 2019.

Higher rootlike lipid prices could complicate governments' efforts to rein successful inflation, whether successful thenar oil-reliant nations oregon those babelike connected rival soybean, sunflower, and rapeseed oils.

STUNTED GROWTH

Palm lipid production, dominated by Indonesia and Malaysia, astir doubled each decennary from 1980 to 2020, fuelling disapproval implicit deforestation to adhd plantations.

During that time, mean yearly accumulation maturation of much than 7% was astir successful enactment with demand.

But Malaysia's thenar lipid accumulation stagnated much than a decennary agone due to the fact that of deficiency of abstraction for caller plantations and dilatory replanting, portion deforestation concerns person slowed maturation successful Indonesia.