Indonesia’s proposed B50 biodiesel mandate is creating uncertainty in palm oil markets as the country considers tightening exports to ensure sufficient domestic supply for biofuel production.

The Ministry of Energy and Mineral Resources indicated it might restrict palm oil exports if the B50 program moves forward. This policy shift would require an additional 3 million metric tons of palm oil compared to the current B40 mandate, while global palm oil production is expected to increase by only 1-1.5 million metric tons.

Current market conditions

CPO BMD prices declined by $16/mt to $1,029/mt compared to the previous week, pressured by lower Brent crude oil prices and bearish MPOB data. For September, MPOB reported ending stocks at 2.361 million metric tons, up 7.4% month-over-month, while the market had expected around 2.15-2.2 million metric tons.

Production turned out stronger than expected at 1.855 million metric tons, declining only 0.73%, while the market had anticipated a 2.5-3% drop.

Indonesian September shipments totaled around 1.451 million metric tons, down 43% month-over-month. One source noted this could have led to stock build-up in Indonesia, as production is believed to have remained stable or strong.

Regional inventory levels

At the end of September, Indian total vegetable oil stocks were estimated at 994,263 metric tons, up 21% year-over-year, and Chinese stocks at 2.759 million metric tons, up 8% year-over-year.

During October 1-10, Malaysian palm shipments stood at 523,000 metric tons, up 10%, according to one surveying company.

Additional supply concerns

Markets are also concerned about plantation land seizures in Indonesia, adding another layer of uncertainty to supply outlooks.

Market outlook

The B50 speculation is expected to sustain support and volatility through Q4. Other supportive factors include seasonally lower production during the rainy season and festive buying starting in December. However, prices may be capped by slower purchasing in October and November and reduced price competitiveness compared to soy oil.

For the period beyond three months, the outlook remains bullish. The implementation of B50 in Indonesia in 2026 would create a structural supply constraint, as the additional 3 million metric tons required for biodiesel production far exceeds expected global production growth.


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