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Section 2: Market Challenges and Opportunities:
Indonesia Biodiesel Mandate: Impact on Palm Oil Prices
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By: Mr. Togar Sitanggang
Mr Togar Sitanggang is the Vice Chairman of Indonesian Palm Oil Association/ GAPKI Since April 2018, Previously He served as Secretary General from April 2015 to April 2018.
Currently, Mr Sitanggang works for PT Musim Mas as General Manager base in Jakarta. He has been in palm oil industries for almost 30 years with national and multinational companies including PT SMART Tbk, Cargill, Bunge, ED & F Man, Darmex in many positions ranging from research, logistics, trading and now corporate affairs.
Mr Sitanggang is also active in palm oil related associations in Indonesia such as APROBI (Association of Biofuels Producers Indonesia), APOLIN (Association of Oleochemicals Manufacturer) and DMSI (Dewan Minyak Sawit Indonesia – Indonesia Palm Oil Board).
Mr. Togar Sitanggang, was born in North Sumatera in 1966, graduated from University of Southern California, Los Angeles, USA, in Computer Science degree and obtained his Master Degree from North Sumatra University in Medan.
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In 2012 we saw Crude Palm Oil prices climbed to over USD 1100 per mt and on the other side of the market, Crude Oil prices also climbed to over USD 120 per barrel. Both high prices that we have not seen happened until today. In fact, both commodities went down to their lowest level since 2012, Crude Palm Oil around USD 480 per mt, in September 2015, and Crude Oil price around USD 30 per mt in January 2016.
Since early 2014, Government of Indonesia has started seen the Trade Balance diminishing and went negative territory in around July-August 2014. The event created a panic within the government officials and they tried to find ways to solve it. Indonesia imported majority of their fuel consumption, both Gasoil and Gasoline. And since Indonesia already have mandatory blending of Biodiesel, Government then turn to the Biodiesel industry for more blending and in order to reduce import of Gasoil.
On this period, the Biodiesel industry was asked to sell Biodiesel to Pertamina based on Gasoil prices, not Palm-based Biodiesel prices (ICIS benchmark). The industry was still able to sell with this scheme only for first few months. Since Oct 2014, the industry started to suffer losses and the worst happened in January 2015 where the industry had to stop all Biodiesel deliveries to Pertamina. The estimated loss for January 2015 was minimum USD 300 per mt.
In early 2015 the Indonesia palm oil industry started the discussion to find ways to stop price decline of Palm Oil and concluded that Biodiesel program can stop the price decline since it will create new demand and this demand was inside Indonesia. The industry also concluded that the only way to support the program is by self-subsidy, from the industry to the industry with collection of levy from the industry to be used to support the palm-based Biodiesel program.
After long months of discussions for creating new regulations on CPO Fund (now called Indonesia Estate-Crop Fund), and regulations that follows for reimbursement of the fund, the first drop of Biodiesel delivered to Pertamina end of September 2015 and price of palm oil has improved since then and highest CPO price we have seen was over USD 700 per mt last December.
Palm Oil has entered new era of demand, Biodiesel!
Currently, the blending rate in Indonesia is 20% and is going very smooth in Transportation sector, creating new demand of around 3 million mt of CPO equivalent per year. Industrial sector is yet to move as planned and when this happened, there would be another 3 million mt of CPO equivalent demand domestically in Indonesia.
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Section 2: Market Challenges and Opportunities |
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Archives |
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MITIGATING THE NEXT WAVE OF MARKET UNCERTAINTIES Nov 14, '22 ~ Nov 18, '22 |
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ASSESSING 2022: MANAGING OPPORTUNITIES AND RISKS Mar 28, '22 ~ Apr 01, '22 |
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Section 2: Opportunities for Palm Oil in Asian Market Oct 18, '21 ~ Oct 24, '21 |
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Section 1: Oils & Fats Supply, Demand and Outlook Oct 18, '21 ~ Oct 24, '21 |
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Section 1: Price Direction Apr 05, '21 ~ Apr 11, '21 |
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Section 2 : Special Focus on the US Apr 05, '21 ~ Apr 11, '21 |
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POINTERS ON THE PRICE TRENDS Jun 22, '20 ~ Jun 28, '20 |
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Section 1 : CPO Price Trend Feb 24, '20 ~ Mar 01, '20 |
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Section 2: Global Palm Oil Market Opportunities Feb 24, '20 ~ Mar 01, '20 |
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Section 2: Special Focus Aug 19, '19 ~ Aug 25, '19 |
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Section 1 : CPO Price Trend Aug 19, '19 ~ Aug 25, '19 |
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Special Focus - India Feb 25, '19 ~ Feb 24, '19 |
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Section 1: CPO Price Trend Feb 18, '19 ~ Feb 24, '19 |
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Section 2: Global Palm Oil Market Focus Aug 06, '18 ~ Aug 12, '18 |
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Section 1: CPO Price Trend Aug 06, '18 ~ Aug 12, '18 |
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Section 2 : Global Palm Oil Market Focus Jan 29, '18 ~ Feb 04, '18 |
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Section 1: CPO Price Trend Jan 29, '18 ~ Feb 04, '18 |
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Section 2: Regional Focus : CIS Countries Aug 21, '17 ~ Aug 27, '17 |
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Section 1: Palm Oil Price Fundamentals Aug 21, '17 ~ Aug 27, '17 |
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Section 2: Market Challenges and Opportunities Feb 20, '17 ~ Feb 26, '17 |
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Section 1: Price Directions Feb 20, '17 ~ Feb 26, '17 |
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Section 1 : Palm Oil Price Fundamentals Aug 22, '16 ~ Aug 28, '16 |
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Section 2 : Trade Issues and Market Prospects Aug 22, '16 ~ Aug 28, '16 |
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2016 Market Direction - Twists and Turns of Palm Oil Prices Feb 22, '16 ~ Feb 29, '16 |
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Second Half 2015 - Anticipating Market Price Direction Aug 17, '15 ~ Aug 23, '15 |
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Special Focus: Indian Sub-Continent Aug 17, '15 ~ Aug 23, '15 |
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Opportunities, Challenges And Trend In 2015 CPO Price Feb 23, '15 ~ Mar 01, '15 |
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2nd Half 2014: Market Challenges, Predictions And Directions Aug 25, '14 ~ Aug 31, '14 |
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Anticipating 2014 Palm Oil Price Direction Feb 17, '14 ~ Feb 24, '14 |
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Prospects For Second Half Of 2013 - Managing Price Fluctuations Jul 22, '13 ~ Jul 29, '13 |
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Mapping The Palm Oil Price - 2013 Market Perspective Feb 18, '13 ~ Feb 27, '13 |
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Palm Oil : Challenges, Opportunities And Latest Market Directions Aug 06, '12 ~ Aug 17, '12 |
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2012 Price Direction, Issues & Challenges Feb 13, '12 ~ Feb 20, '12 |
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Challenges, Opportunities And Latest Price Trend Aug 08, '11 ~ Aug 16, '11 |
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Challenges, Opportunities And Price Direction Feb 07, '11 ~ Feb 17, '11 |
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2010 Year End Prospects - What Lies Ahead? Aug 02, '10 ~ Aug 08, '10 |
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As far as all information received as of now, there is no intention from Government to reduce the blending below 20%. Government is confident that the fund is enough to support all programs under Indonesia Estate-Crop Fund which include replanting, promotion, human resources development, research, biodiesel and others.
7 years ago
Dear pak Yudha, thank you for your comments and questions. Apologize for a bit of delay due to Im currently travelling. To answer your questions: 1. the target of 4.6mio KL might not be achieved due to non-PSO program is yet to pick up in full speed. My guesstimate would be almost the same as 2016, around 3mio KL. 2. Yes, the regulation is there and you are correct the regulation to disbursement of fund for non-PSO is still far from the horizon. There have been a lot of discussions back and forward between industry and government on this issue but still no clear directions yet. I am afraid we have to wait and see the outcome for this moment.
7 years ago
Thanks for the response Pak. If I may ask a follow-up question, what are some of the major concerns/issues that industry/government have that may held back the establishment of fund disbursement mechanism for non-PSO?
7 years ago
The fund was originally designed for PSO support. Since the program begins price difference between CPO and Gas Oil widened. The fund still enough for the PSO but will not be enough to support non-PSO. Also, there was a small 'mistake' on wording of revised Perpres, it was actually intended for electricity support but it did not stated specifically. Hence, it become for all Gas Oil usage as we read on Permen 26/2016.
7 years ago