Indonesia has introduced a wide-reaching palm oil export ban, taking international buyers by surprise with a last-minute change to include crude palm oil and other refined products.
- The Indonesian President said the ban was designed to combat rising food prices
- Indonesia supplies the world with a third of its palm oil
- Two palm oil tankers were seized the day before the ban
The Chief Economic Minister had earlier said the ban would only cover refined, bleached and deodorized (RBD) palm olein.
But in a surprise policy U-turn late on Wednesday, Indonesian authorities announced crude palm oil and other products would also be included.
Indonesia is the world’s largest palm oil producer, providing the world with about one-third of its supply.
The move had an immediate impact on global vegetable oil prices, sending palm oil futures in the second-largest supplier, Malaysia, up by 9.8 per cent.
Indonesian President Joko Widodo said he wanted to ensure the availability of food products at home, after global food inflation soared to a record high following Russia’s invasion of major crop producer Ukraine.
“I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable,” he said.
The trade ministry regulation also said exporters who secured customs declaration by April 27 at the latest would still be allowed to export their products.
Chief Economics Minister Airlangga Hartarto said the ban would be lifted when the price of bulk cooking oil came down to 14,000 rupiah ($1.35) a liter across Indonesia.
The current price sits at about $1.75 to $1.93 per liter.
Export seized tankers
Demonstrating Indonesia’s determination to enforce the export ban, its navy said it had seized two tankers carrying crude palm oil, palm olein and methanol for paperwork discrepancies the day before the measure took effect.
One of the tankers, MT Annabelle, was bound for Shajrah in the United Arab Emirates with 13,357.4 tons of crude palm oil and 98 barrels of methanol on board.
The other vessel, MT World Progress, was traveling towards India carrying 34,854.3 tons of palm olein.
India is the world’s biggest importer of palm oil and relies on Indonesia for nearly half of the 700,000 tons it takes in every month.
“Our vessel of 16,000 tons is stuck at Kumai port in Indonesia,” said Pradeep Chowdhry, managing director of Gemini Edibles & Fats India, which buys about 30,000 tons of Indonesian palm oil every month.
Buyers are now rushing to make purchases from Malaysia, but Kuala Lumpur cannot fill the demand, said Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil brokerage and consultancy firm.