Indonesia to tighten palm oil exports from January 1

Indonesia will tighten export rules for palm oil from January 1 by allowing fewer shipments overseas for every tonne sold domestically, in a move aimed at ensuring sufficient domestic supply.

Exporters will be allowed to ship six times their domestic sales volume, less than the current ratio of eight times, according to a new regulation reviewed by the Reuters news agency and confirmed by an industry official.

“To secure domestic supply, especially for the first quarter of 2023,” said Septian Hario Setio, a senior official at the Coordinating Ministry for Maritime and Investment Affairs, on Friday.

Seto said the ratio will be evaluated periodically by considering the domestic situation, including cooking oil availability and prices.

Indonesia earlier this year introduced export measures on palm oil products amid concerns about cooking oil prices spiralling out of control.

A brief ban on exports of the edible oil from Indonesia shook markets and exacerbated existing global supply concerns, but it also led to ballooning domestic inventory.

Indonesia currently imposes a so-called domestic market obligation (DMO) requiring businesses to sell a portion of output locally in return for export permits.

In a meeting with the government last week, Indonesian Palm Oil Association (GAPKI) Secretary General Eddy Martono said there were still concerns about cooking oil supply, related to the government’s biodiesel programme and expectations of lower palm oil output in the first quarter. Indonesia is planning to increase the mandatory palm oil component to 35 percent starting February 1.

The world’s most populous Muslim country will also celebrate Ramadan in March 2023, when food demand including cooking oil is expected to rise, Eddy said.

While businesses would comply with the regulation, Eddy said the new export ratio should be evaluated regularly in the short term.