Update: Indonesia to implement B40 palm oil biodiesel on Jan. 1, 2025
Indonesia plans to implement biodiesel with a mandatory 40% blend of palm oil-based fuel from Jan. 1 next year, a senior energy ministry official said on Thursday, lifting prices of the vegetable oil to a more than two-week high.
Indonesia currently uses B35, which has a 35% blend of palm oil-based biodiesel, and the government had previously said it would increase the blend to 40% next year without specifying a start date.
"There is no issue in terms of supply volume and other aspects, so we are ready for a mandatory (implementation)," energy ministry senior official Eniya Listiani Dewi said.
Malaysia's benchmark palm oil futures rose 1.92% to 3,826 ringgit ($874.31) a metric ton on Thursday, its biggest daily gain since July 2.
"Today's rally is largely driven by Indonesia's announcement of B40. The market knew that it was coming but it is the announcement which has driven prices higher today," said one Singapore-based vegetable oils analyst.
When implemented, the B40 mandate could increase biodiesel consumption to up to 16 MM kilolitres (kl) next year from a forecast of 13 MMkl this year, the energy ministry has estimated.
B40 will boost Indonesia's palm oil use for biodiesel to 13.9 metric MMt, from the estimated 11 MMt needed this year with B35, Indonesia's biofuel producers association APROBI had previously estimated.
Domestic palm oil consumption has grown 7.6% on average since 2019, driven in part by policies including biodiesel mandates and compulsory domestic sales for cooking oil, while output has risen less than 1% annually, according to GAPKI data.
Indonesia's biggest palm oil producers association GAPKI had warned that a higher mix could hurt exports amid stagnating production.
The regulation stating the B40 mandate is yet to be issued.
($1 = 4.3760 ringgit)
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