Malaysia, Indonesia Plans to Export Palm Oil to China


Malaysia and Indonesia will discuss plans to export crude palm oil (CPO) for biodiesel to China.

Malaysian Plantation Industry and Commodity Minister Mah Kew Siong yesterday, August 24, said that the two countries will be discussing the plan to export CPO to China. The latter is seeking to adopt 5% biodiesel blended with petroleum diesel (B5) program.

China is eyeing biodiesel as it increases environmental control, Mah Kew Siong said. He added that the implementation of the B5 program would create a large CPO market.

Therefore, Indonesia and Malaysia ought to cooperate to meet China’s demand, he noted. He added that Malaysia wishes to expand biodiesel market to other countries, such as India and the Philippines.

PT Asia Trade Point Futures analyst Deddy Yusuf Siregar said that China’s B5 program will create new CPO demand totaling 9 million tons per year. It means that China will become a potential market for Indonesia’s export.

According to Deddy, China’s B5 program will open up new opportunity to support CPO price in the long term. He reasoned that market players have repeatedly sold the commodity in view of the projected increase in CPO production in 2017.

CPO supply is likely to increase in the near future following the impact of El Nino in 2016. “The chance of CPO price hike this year is hampered by the projected increase in production,” he said.

This year, Indonesia’s palm oil production is expected to increase by 12.69 percent year-on-year (YoY) to 35.5 million tons. Meanwhile, new supply from Malaysia is predicted to grow by 10.17 percent YoY to 19.5 million tons.

As such, as projected supply recovery puts CPO prices under pressure, business players can still pin their hope on an increase in demand, which is an expected result from China’s B5 program.


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