Agriculture, Energy Transition, Biofuel, Oilseeds, Renewables

January 08, 2025

Indonesia restricts UCO, palm oil residue exports ahead of B40 biodiesel mandate

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HIGHLIGHTS

To ensure sufficient domestic supplies

Exports to require government approval

Local POME prices fall sharply

Indonesia has restricted exports of used cooking oil and palm oil residue including palm oil mill effluents, effective immediately, to support its new B40 biodiesel blending mandate.

Exporters are now required to obtain approval from the government to ship UCO and palm oil residue. Export permit applications for these feedstocks have been suspended to ensure sustained availability of feedstock for the B40 biodiesel production, according to a government statement.

The country announced it would raise its biodiesel blending mandate from 35% of palm oil in 2024 to 40% on Jan. 1, 2025. But it delayed the implementation of the policy, adding to market uncertainties.

On Jan. 3, the country's Energy and Mineral Resources Minister Bahlil Lahadalia signed a decree to allocate 15.6 million kiloliters of biodiesel in 2025. Of that, 7.55 million kiloliters will be allocated for Public Service Obligation and 8.07 million kiloliters for non-PSO utilization. In comparison, the B35 biodiesel allocation in 2024 was 13.4 million kiloliters.

Market stakeholders are allowed up to two months to transition from B35 blending to B40. The government also reiterated its plan to increase biodiesel blending from B40 to B50 in 2026.

The expansion of Indonesia's biodiesel mandate echoes President Prabowo Subianto's ambition for the country to become energy self-sufficient. Indonesia is the largest producer of palm oil producer and POME, ahead of neighboring Malaysia.

"Market stakeholders for POME are digesting the developments and the impact of this restriction is still unclear," one source said.

"Local POME prices in Indonesia have plummeted as uncertainties surrounded the B40 mandate in addition to the decrease in the CPO reference price," a second source said.

Platts, part of S&P Global Commodities Insights, assessed POME FOB Indonesia at $1,015/mt Jan. 8, down $10/mt day over day. For January, the export levy for POME was at $79.47 while its duty was at $12, following a decrease in Indonesia's January CPO reference price to $1,059.54/mt from December 2024.