Kuala Lumpur: Indonesia’s domestic palm oil consumption could rise by about three million tonnes if the government moves ahead with its proposed B50 biodiesel mandate, according to CIMB Securities Sdn Bhd, reports Business Times.
The brokerage said this increase would represent around 6.2% of Indonesia’s estimated crude palm oil (CPO) output of 48.2 million tonnes in 2024, based on data from the Indonesian Palm Oil Association (GAPKI).
“If Indonesia rolls out B50, it would likely support CPO prices in 2026, as the added demand could help offset the impact of higher US import tariffs,” CIMB said. From August 1, 2025, the US will raise palm oil tariffs to 19% for Indonesia and 25% for Malaysia.
Indonesia is currently assessing the feasibility of B50, which would require blending 50% biodiesel into regular diesel fuel. Eniya Listiani Dewi, Director General of New and Renewable Energy at Indonesia’s Ministry of Energy and Mineral Resources, said that while the plan is under review, no final decision has been made. The government is still consulting experts and evaluating feedstock availability and production capacity.
To support a potential B50 rollout, the ministry has said that five new biodiesel plants would be needed, with three already under construction.
In the meantime, CIMB Securities noted that Indonesia’s current B40 biodiesel target for 2025 is progressing well and is expected to raise domestic palm oil use by two million tonnes, further reducing the country’s exportable surplus.
“We’re also seeing strong support for biodiesel subsidies,” the firm added. Of the 15.62 million kilolitres (kls) allocated for biodiesel in 2025, 7.55 million kls—about 48%—is set aside for public transport and other public service obligation (PSO) sectors, and will be fully subsidised. The remaining 8.07 million kls will be sold at market prices.
CIMB said that if B50 is implemented, it could tighten palm oil supply in 2026. The Indonesian Biofuel Producers Association (APROBI) estimates B50 would raise annual biodiesel demand from 15.6 million kls (under B40) to around 19 million kls. The Ministry of Energy also projects B50 would require 19.7 million kls of biodiesel. To meet this, Indonesia must expand its current installed capacity of about 19.6 million kls.
In a related update, CIMB said Malaysia has set the August gazetted CPO price at RM3,864 per tonne, resulting in an increase in the country’s CPO export tax to 9%, up from 8.5% in July.
The firm noted that the combination of Malaysia’s higher export tax and the upcoming US tariff hike could push exporters to ship more palm oil before the changes take effect, potentially lifting CPO prices in the short term.
CIMB is maintaining its average CPO price forecast of RM4,200 per tonne for 2025 and continues to rate IOI Corporation Bhd and Hap Seng Plantations Holdings Bhd as its top picks in the plantation sector.
