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KUALA LUMPUR (Jan 7): Indonesia’s B40 biodiesel mandate, which requires a higher palm oil mix, is a crucial factor that will lend support to the demand for the edible oil, said Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani.
“They (Indonesia) have allocated almost 25% of that for biodiesel production, which greatly supports the industry. Imagine if they didn’t use palm oil for biodiesel — this 25% surplus would flood the global market,” Johari told the media after the signing ceremony of a collaboration between FGV Holdings Bhd (KL:FGV) and the Malaysian Palm Oil Board (MPOB).
However, Indonesia has postponed the implementation of its planned increase in the mandatory biodiesel blend from 35% (B35) to 40% (B40). The delay, originally scheduled for Jan 1, 2025, is due to infrastructure adjustments and other technical considerations.
The B40 biodiesel mandate requires the ratio of 40% palm oil to 60% diesel.
Johari cautioned that countries like Malaysia would face downward pressure on palm oil prices if Indonesia did not proceed with its biodiesel programme.
To support the B40 initiative, Indonesia, the world’s largest palm oil producer, may need to raise its export levy to 10% from the current 7.5%, potentially making its palm oil products more expensive compared to those produced in Malaysia. This will in turn result in an increase in the demand for Malaysia-produced crude palm oil (CPO), pushing its average selling price higher.
Meanwhile, the collaboration between FGV and MPOB aims to explore opportunities for integrating advanced technologies such as geolocation mapping, data verification, blockchain for traceability, and analytical tools to enhance decision-making.
The collaboration also seeks to support smallholders in complying with the Malaysian Sustainable Palm Oil (MSPO) standards and European Union Deforestation Regulation (EUDR) requirements, thereby boosting their competitiveness and facilitating access to premium palm oil markets.