(Indonesia) Indonesia fully implements B40 biodiesel, palm oil domestic demand increases

Indonesia will increase the mandatory blending ratio of biodiesel from B35 to B40 from January 1, 2025, I .e. 40% palm oil-based biodiesel will be blended into diesel oil, and a transition period until the end of February will be set for the market to digest B35 stocks. This is the largest biodiesel blending upgrade program in the world.

According to the quota arrangement issued by Indonesia's Ministry of Energy and Mineral Resources, the total distribution of B40 biodiesel in 2025 is about 15.62 billion litres, including 7.55 billion litres of compulsory diesel for public services, 8.07 billion litres for non-public sectors and 13.5 billion litres for the whole year. The government expects B40 to increase palm oil industry consumption by 2 million -3 million tons per year, and Indonesia's palm oil industry consumption is expected to reach about 14.7 million tons in 2024/25.

There are multiple considerations behind the policy: reducing diesel imports and foreign exchange expenditures, digesting palm oil excess capacity, and supporting domestic palm oil prices. However, the market is also concerned about subsidy funds and implementation capacity-blending subsidies rely on palm oil export tax revenue, price and tax revenue fluctuations will directly affect the implementation rate.

As the world's largest producer and exporter of palm oil, Indonesia's domestic demand expansion will correspondingly reduce its export supply, supporting global palm oil and vegetable oil prices, and the procurement cost structure of major importing countries such as China and India will also be adjusted accordingly.

Source: Indonesian Ministry of Energy and Mineral Resources; USDA FAS Jakarta Report; Antara News Agency, January 2025.