Indonesia's palm oil exports to China have plummeted by half in volume amid global uncertainties, an industry source has said.
The Indonesian Palm Oil Producers Association (Gapki) said in a statement last week that China’s export volume fell by 381,000 tonnes or 57 per cent. This contributed to the sharp drop in the country’s total palm oil exports, which declined by 35.6 per cent to 2.39 million tonnes in January from 3.72 million tonnes in December.
“The drastic export decline in January could be because importing countries were still holding on to their stock while waiting for the Indonesia government to implement a 30 per cent blended biodiesel [B30] programme,” the association said in the statement.
Should the decline continue, overall export performances could be dragged down this year as palm oil has remained the country’s top export. The palm oil industry is one of Indonesia’s major foreign exchange earners, contributing 13.5 per cent to total non-oil and gas exports worth $22.3 billion, Minister of Finance Sri Mulyani said on March 2.
A decline in palm oil exports to China will also hit the industry hard as one of the country’s main buyers of the commodity. Last year, China imported six million tonnes of palm oil from Indonesia, representing 16.5 per cent of overall palm oil exports during the year, Gapki data showed.
But China is not the only destination that saw a decline in palm oil exports in January. Palm oil exports to the EU fell by 188,000 tonnes (30 per cent), 141,000 tonnes (22 per cent) for India and 129,000 tonnes for the US (64 per cent).
Only Bangladesh saw a month-to-month increase by 52 per cent to 40,000 tonnes in January.
The novel coronavirus, which emerged in China late in December, could further lower the country’s crude palm oil (CPO) imports from Indonesia, as most of the country’s industries, including food and beverage producers, were closed for months.
However, CPO CIF Rotterdam prices rose in January, as CPO prices increased to an average of $830 per tonne from an average of $787 tonnes in December. CPO production also increased to 3.48 million tonnes in January from 3.45 million tonnes in December.
“We hope that such good prices will motivate farmers and companies to take better care of their plantations in order to achieve higher productivity,” Gapki wrote in the statement.
Outside of CPO, palm oil kernel and palm oil-based biodiesel exports also declined while palm oil oleochemicals exports rose by 22.9 per cent, Gapki data showed.
Despite the export slowdown, domestic palm oil consumption increased slightly to 1.47 million tonnes in January from 1.45 million tonnes in December.
The increase is in line with President Joko “Jokowi” Widodo’s policy to increase the mandatory use of 20 per cent blended biodiesel (B20) and B30, which was made in response to the EU’s palm oil restrictions.
The domestic market is expected to absorb nine million tonnes of CPO a year once the B20 and B30 policies are both implemented.
Jokowi had previously asked stakeholders to increase the mandatory use of CPO-based biodiesel from B20 to B30 by January and to 50 per cent (B50) by the end of this year.
The association painted a bleak picture of the industry going forward. The unstable petroleum prices as a result of disagreements between Russia and the Organisation of Petroleum Exporting Countries (Opec) coupled with the Covid-19 pandemic will contribute to the global economic slowdown, pushing down demand for imported vegetable oils.
It also expressed worries that vegetable oil prices would fall if the outbreak lasted until Idul Fitri. Experts have predicted that Covid-19 will peak in May or June. On top of that, industries will soon face the drought season, when forest and land fires are rampant.
THE JAKARTA POST/ASIA NEWS NETWORK