<News analysis> Indonesia CPO export ban will end next week
What’s new
- According to Reuters, Indonesia will lift its palm oil export ban from next Monday, following some improvements in the domestic cooking oil supply situation, President Joko Widodo said on Thursday.
- The world’s top palm oil exporter has since April 28 halted shipments of crude palm oil (CPO) and some derivative products to try to tame soaring prices of domestic cooking oil.
- The decision comes despite bulk cooking oil having not yet receded to the targeted 14,000 rupiah per litre price, as the government considers the welfare of 17 million workers in the palm oil industry, the president said in a video statement.
- President Jokowi said the supply of bulk cooking oil has now reached a level greater than what the domestic market needed.
Our view
- End of CPO export ban is positive for Indonesia domestic CPO price. We believe the gap between Indonesia domestic CPO price and benchmark CPO price will narrow back to 20%-25%. Indonesia domestic CPO price could normalize to Rp15,000/kg vs. 18 May’s level of Rp13,000/kg.
- First Resources (FR) and other palm oil refiners now could resume exports. Palm oil exporter such as FR and other palm oil refiners will resume their export operation next Monday hence we can ignore previous risks such as revenue losses and milling activities reduction due to pro-longed ban in 2Q22. Amid strong CPO price and refining margin , both will sustain their positive 1Q22 earnings momentum for the rest of this year. The ban previously had less impact to Bumitama ( BAL) and Lonsum (LSIP) , but both will enjoy stronger domestic CPO price trend after the ban lifted.