# Indonesia’s palm oil export ban seen short-lived on limited storage
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-04-26
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Indonesia's Palm Oil Export Ban: Limited Duration
Meta Description: Stay informed on Indonesia's export ban on palm oil. Learn how the industry is affected and what to expect in the coming months. Stay updated with Reuters.
URL: https://financedigest.com/indonesias-palm-oil-export-ban-seen-short-lived-on-limited-storagehtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-04-26t101304z1lynxnpei3p0ekrtroptp4indonesia-palmoil-storage-1736815819466-compressed.jpg)

By Bernadette Christina and Rajendra Jadhav

JAKARTA/MUMBAI (Reuters) -Indonesia’s ban on palm oil exports is unlikely to last more than a month as Jakarta has limited infrastructure to store the surplus oil and the country faces mounting pressure from buyers to resume shipments, industry officials said.

The world’s top palm oil exporter announced plans to ban exports on Friday, in a shock move that lifted prices of all edible oils and sowed confusion and alarm among palm oil exporters and consumers alike.

Market panic subsided on Monday after officials told palm oil executives the ban will only apply to exports of refined, bleached and deodorized (RBD) palm olein starting on Thursday, and would not affect flows of [crude palm oil](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") or other forms of derivative products.

However, Jakarta will widen the [ban “if there is a shortage of refined palm oil,”](https://www.financedigest.com/explainer-why-malaysia-is-considering-a-ban-on-palm-oil-exports-to-the-european-union.html "Explainer-Why Malaysia is considering a ban on palm oil exports to the European Union") according to a presentation the government gave to companies on Monday.

RBD palm olein accounts for around 40% of Indonesia’s total [exports of palm oil](https://www.financedigest.com/u-s-oil-exports-to-europe-hit-record-in-march-on-steep-discounts.html "U.S. oil exports to Europe hit record in March on steep discounts") products, according to analysts’ estimates.

The prospect of further tweaks to [export restrictions has caused jitters among Indonesian palm oil producers and processors who typically export over twice as much palm oil as is consumed domestically](https://www.financedigest.com/turkeys-economy-grew-7-6-in-q2-driven-by-domestic-demand-exports.html "Turkey’s economy grew 7.6% in Q2 driven by domestic demand, exports").

Based on simple calculation, even before one month, all the tanks would be full if it’s a total ban,” said Eddy Martono, secretary general of GAPKI, [Indonesia’s biggest palm oil](https://www.financedigest.com/u-s-sanctioned-oil-tanker-stuck-in-indonesia-carries-venezuelan-fuel.html "U.S.-sanctioned oil tanker stuck in Indonesia carries Venezuelan fuel") association.

Once tanks run out of space, mills can’t process the fresh fruit bunches, which would rot and force production to drop, Martono told Reuters.

Indonesia’s ban on exports of RBD palm olein will become effective from midnight on April 28 and will remain until [prices of cooking oil](https://www.financedigest.com/oil-prices-stable-heading-for-weekly-gain.html "Oil prices stable, heading for weekly gain") drop to 14,000 per litre, chief economic minister Airlangga Hartarto said late on Tuesday.

We should see after the regulation is set, whether [production is running smoothly and palm oil](https://www.financedigest.com/best-paying-jobs-in-oil-and-gas-production.html "Best Paying Jobs in Oil And Gas Production") mills continues to buy fresh fruit bunches from farmers. If they reduce it means there is an indication the tank will be full,” Martono said.

Indonesia is now holding around 5 million tonnes of palm oil stocks, and the country’s storage capacity of around 6-7 million tonnes would be full by the end of next month, said a Singapore-based dealer with a [global trading firm](https://www.financedigest.com/sp-global-acquires-firm-to-bolster-capability-to-track-commodity-shipments.html "S&P Global acquires firm to bolster capability to track commodity shipments").

Indonesia produces around 4 million tonnes of [palm oil](https://www.financedigest.com/watchdogs-new-chief-says-high-prices-can-support-greener-palm-oil.html "Watchdog’s new chief says high prices can support greener palm oil") every month and consumes around 1.5 million tonnes.

In 2021, Indonesia consumed 18.4 million tonnes of palm [oil out of total production](https://www.financedigest.com/oil-rises-on-saudi-oil-production-expectations.html "Oil rises on Saudi oil production expectations") of 51.3 million tonnes, GAPKI estimates.

As the domestic cooking oil market is not enough to absorb all the production, a more extended [ban may hurt the industry](https://www.financedigest.com/is-googles-payday-lender-ad-ban-singling-out-the-industry.html "Is Google’s payday lender ad ban singling out the industry?"), particularly the smallholders,” said Carolyn Lim, senior manager, corporate communications at Musim Mas, a palm oil producer with plantations in North Sumatra.

Since the ban only covers RBD palm olein, Musim Mas estimated it could [last a few months](https://www.financedigest.com/fintech-trends-to-look-out-for-during-the-last-six-months-of-2019.html "Fintech trends to look out for during the last six months of 2019"). If it had cover a wider range of products, it would’ve been shorter, Lim said.

Fresh fruit bunch prices have already dropped by between 400 rupiah and 1,000 rupiah per kilogram since the announcement, from 3,700-3,900 per kilogram, Mansuetus Darto, secretary general of Indonesia’s Oil Palm [Farmers Union](https://www.financedigest.com/frances-cristal-union-lures-farmers-to-secure-sugar-beet-supplies.html "France’s Cristal Union lures farmers to secure sugar beet supplies"), said in a statement.

The [ban is a political decision to support](https://www.financedigest.com/uk-financial-watchdog-urges-political-support-for-crypto-bans.html "UK financial watchdog urges political support for crypto bans") consumers. But if the government keeps it for a longer period, then farmers will suffer,” said a Mumbai-based vegetable [oil dealer with a global trading firm](https://www.financedigest.com/uk-oil-gas-firms-to-leave-years-worth-of-output-in-ground-with-tax-hikes-report.html "UK oil, gas firms to leave year’s worth of output in ground with tax hikes-report").

Buyers of Indonesian palm [oil have already voiced complaints about its export policies](https://www.financedigest.com/ing-toughens-oil-and-gas-policy-to-include-trade-finance-midstream.html "ING toughens oil and gas policy to include trade finance, midstream") and will ask Jakarta to review the policy, said Rasheed JanMohd, chairman of Pakistan Edible oil Refiners Association (PEORA).

It’s [time for Indonesia to cut](https://www.financedigest.com/britains-purplebricks-to-cut-more-than-10-of-jobs-the-times.html "Britain’s Purplebricks to cut more than 10% of jobs – The Times") down use of palm oil for biodiesel and remove the ban. If Indonesia [continues the ban](https://www.financedigest.com/the-trend-continues-nyc-passes-salary-history-ban.html "The Trend Continues: NYC Passes Salary History Ban"), then we would ask the Pakistan government to speak to the Indonesian government to restore supplies,” JanMohd said.

India, the [world’s biggest](https://www.financedigest.com/biggest-economy-in-the-world.html "Biggest Economy in the World") palm oil importer, has requested Indonesia to increase supplies.

(Reporting by Rajendra Jadhav and Bernadette Christina Munthe; Editing by Gavin Maguire, Jacqueline Wong and David Evans)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---