Palm oil export ban not as strict as feared
? Indonesia’s agriculture ministry said CPO will be excluded from export ban.
? The clarification came after a sharp fall in FFB prices in Indonesia.
? Indonesian palm oil producers less impacted by the export ban than feared.
Ministry of Agriculture says CPO excluded from palm oil ban
? According to a copy of an official letter sent to local government leaders yesterday,
Indonesia’s agriculture ministry said that crude palm oil shipments would be excluded
from a planned palm oil export ban. The letter, which was verified by a ministry official,
said the ban would however include refined, bleached and deodorised (RBD) palm olein.
It was still unclear on Monday whether products such as RBD palm oil and palm stearin
would be affected. To recap, Indonesian President Joko Widodo late last Friday
announced a ban on palm oil exports, taking effect on 28 April. He said on Friday that
exports of cooking oil and its raw material would be banned but did not mention details.
A relief for importers of palm oil but…
? We gathered that the clarification came about following reports that fresh fruit bunches
(FFB) prices declined by Rp300-1,400/kg from Rp3,000/kg following the news on the
export ban on cooking oils and its raw materials. The exemption of CPO from the export
curbs will be a positive relief for key importers of Indonesia palm oil, like India, China,
EU and Bangladesh. However, it is unclear if the exemption on CPO and other palm oilrelated products from the temporary export ban will effectively achieve the government’s
objective of abundant and affordable domestic cooking oil supplies, failing which we are
concerned that crude palm oil will be added to the list of banned products as it is a raw
material for RBD palm olein.
Indonesia could shift palm oil exports mix in favour of CPO
? According to data from Indonesia’s palm oil association (GAPKI), exports of processed
CPO in 2021 stood at 25.7m tonnes, or 75% of total exports of palm products. CPO
exports were 2.74m tonnes in 2021, or 7.98% of the shipments. In Jan-Feb 2022,
processed CPO exports amounted to 3.38m tonnes or 79% of exports while CPO
exports came to 90,000 tonnes, 2% of the total shipped. The temporary export ban on
RBD palm olein but not CPO could result in traders shifting their palm oil export mix in
favour of CPO to be refined at destination markets like China and India, benefitting
refiners at destination markets. This could be negative in the short term for palm oil
refiners in Indonesia as they will be unable to export certain processed palm products.
On top of this, palm oil importers could shift their sourcing to other markets from
Indonesia given concerns of potential abrupt changes to the country’s ruling on palm oil
exports. We are of the view that the ban on palm oil exports by the Indonesian
government will be constantly reviewed and needs to be closely tracked.
Potential impact on CPO prices and players
? CPO price futures in Malaysia rose as much as 7% to RM6,799 per tonne before
retreating and giving up all its gains to close lower by 2% at RM6,229/tonne following
reports that CPO will be exempted from the export ban. We are of the view that CPO
prices will stay volatile in the near term pending further clarification from other ministries
relating to the new export ruling. We are of the view that Indonesia palm oil exporters
will tread cautiously amid the revised ruling after Indonesian prosecutors recently
charged a top trade ministry official and three palm oil executives from Musimas, Wilmar
and Permata Hijau in connection with a scarcity of cooking oil, which had led to protests
and caused public unrest. The above news suggests that Malaysian palm oil producers
(KLK, FGV, IOI, Sime Plant, Hap Seng Plant, Ta Ann) may not benefit as much as earlier
expected of a blanket ban on all Indonesian palm oil exports while Indonesian palm oil
producers (AALI, LSIP, TAPG, DSNG, FR, GGR) and downstream processors of palm
oil (FR, GGR, Wilmar) will be less impacted than feared as the export ban appears to
be limited to a few processed palm products.