Indonesia’s renewed biodiesel push can boost palm oil prices, says CIMB Securities
Indonesia’s planned B50 biodiesel mandate—mixing 50% palm-based methyl ester with petroleum diesel—could tighten crude palm oil (CPO) supply by 4 million tonnes, supporting higher prices and potentially triggering a re-rating of plantation stocks. The program, targeting 2026 rollout, faces risks like funding, production capacity, and food security concerns.
KUALA LUMPUR (Oct 10): A biodiesel renewed push by Indonesia could support higher palm oil prices and lead to investors re-accessing valuations of plantation stocks, said CIMB Securities.
The B50 biofuel mandate, which requires a 50:50 mix of palm-based methyl ester and petroleum diesel, could consume another four million tonnes of crude palm oil, according to the research house’s estimates. If implemented, palm oil’s supply will tighten, supporting higher prices, the house said.
“The planned B50 rollout represents a structural positive for CPO (crude palm oil) prices, and, if fully implemented, could trigger a re-rating of plantation stocks,” CIMB Securities said.
Indonesia, the world’s largest palm oil producer, is planning to roll out the mandate by the second half of 2026 following the success of the B40 programme, in a bid to enhance energy security, reduce reliance on diesel imports, and boost domestic demand for the edible oil.
The B50 programme is now in its final trial phase involving testing of the fuel in ships, trains, heavy machinery, and vehicles.
CIMB Securities said demand could increase about 5% from the total consumption in 2024, but flagged risk of potential delays in B50 implementation, including due to insufficient funds to subsidise the programme, inadequate biodiesel production and blending capacity, and food security concerns.
Prices of palm oil, used in everything from lipstick to infant formula, have climbed more than 23% from its lows in May, thanks to strong demand from key importers India and China, as well as concerns over unfavourable weather curbing supply.
Bursa Malaysia Plantation Index, which tracks 41 stocks in the sector, have rallied 8% over the same period.
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Source : The Edge Malaysia
