Indonesia has postponed the rollout of its planned higher biodiesel blend, initially set for January 1, as industry participants await technical details of the new regulation. This delay has caused confusion among palm oil traders, Reuters reported.
The government had promised to mandate a 40% blend of palm oil-based fuel in biodiesel, known as B40, up from the current 35% blend. However, the new mandate has yet to be implemented.
As a result of the uncertainty surrounding the B40 rollout, the benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed 2.5% lower on Thursday at 4,336 ringgit ($968.72) per metric ton. This drop followed a rise of about 1.8% earlier in the day when the contract tracked gains in Dalian vegetable oil futures.
The proposed increase in the biodiesel blend, which would be implemented by the world’s largest palm oil producer, helped drive Malaysia's palm oil contract up nearly 20% in 2024. The expectation was that Indonesia would reduce palm oil exports, benefiting Malaysia.
As of Thursday, Indonesian state-owned oil and gas company PT Pertamina and the biodiesel producers group APROBI both confirmed they were still awaiting official decrees before proceeding with the sale of B40 biodiesel.
"Once the regulation is issued, there will be time to transition for sales. We have prepared the Plaju and Kasim refineries for B40 processing," said Pertamina spokesperson Fadjar Djoko Santoso.
Read also : MEMR inspects Pertamina’s readiness for B40 biodiesel launch
Ernest Gunawan, Secretary General of APROBI, explained that members cannot proceed with biodiesel distribution contracts without the official decree from the government.
Edi Wibowo, the director of bioenergy at Indonesia's Energy Ministry, stated on Thursday that he was waiting for further instructions on B40 but did not provide additional details. Other senior officials at the ministry did not respond to inquiries regarding the B40 implementation.
Industry observers had anticipated a gradual rollout of the policy. In the meantime, palm oil traders are waiting for clarity on the official volume of biodiesel that Indonesia will allocate to fuel retailers, as this will impact export levels.
Indonesian officials had previously announced plans to allocate 15.62 million kiloliters (4.13 billion gallons) of palm oil-based fuel for B40 in 2025.
However, analysts are concerned about the government’s decision to subsidize B40 only for non-industrial use, which accounts for less than half of the country’s biodiesel demand.
"There are hurdles for the bullish sentiment as market participants are still not convinced about the success of Indonesia's B40 biodiesel policy," said Anilkumar Bagani, head of research at Mumbai-based vegetable oil broker Sunvin Group.
Editing by Reiner Simanjuntak
