Indonesia expanded the scope of a January ruling, which required suppliers to declare their export plans of crude palm oil, olein and used cooking oil, to include all palm oil products, the country's trade ministry said Feb. 9.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
From Feb. 15 all palm products must comply with the Domestic Market Order (DMO) before suppliers can get permits to export, Indonesia's ministry of trade said.
On Jan. 27 Indonesia issued a mandate for palm oil producers to set aside 20% of their crude palm oil shipments for local buyers as the world's largest vegetable oil producer and exporter tries to curb high domestic edible oil prices.
While Indonesia typically consumes less than 40% of the 46 million - 48 million mt of crude palm oil, or CPO, that it produces, domestic cooking oil prices have surged in the past year as local prices rose on the back of record surges in international vegetable oil markets through 2021.
In January Indonesia exported about 1.75 million mt of crude and refined palm oil products, down from the 2.03 million mt in December, estimates from cargo surveyors showed.
To reign in prices, Jakarta had announced a Rupiah 7.6 trillion ($528 million) one-price cooking oil policy, to supply about 1.5 billion liters of subsidized cooking oil (roughly 1.36 million mt) on Jan. 18.
This included a provision requiring palm oil exporters to declare how much CPO, refined, bleached, and deodorized (RBD) Palm Olein and Used Cooking Oil (UCO) they plan to sell internationally and to the domestic market to obtain permits for their exports for the next six months.
The ruling has received mixed reactions from the market, first fanning CPO prices higher on the keenly watched Malaysian commodities market due to supply concerns while Indonesian exports got stuck due to confusion over the new export permits and how the rule will be implemented.
Following the announcement, April palm oil futures on the commodity exchange Bursa Malaysia moved up 147 points to MR5,596/mt at market close, reversing a 46-point slump at midday.
Locally there is a shortage of cooking oil with a lot of village markets still selling cooking oil above the Rupiah 14,000/liter price cap announced by the government, a source told S&P Global Platts.
While there was some market talk about the government back tracking from its 20% requirement in the past week, the latest ruling [Feb. 9] will complicate compliance for exporters as it adds more products which will need permits, another trader told Platts.
Indonesian palm oil export prices rose 9% from Dec. 31, reaching $1,410/mt Feb. 8, Platts data showed.