Reprieve as Indonesia says export ban only for RBD palm olein

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Strict supervision is still needed pertaining to the raw materials for RBD palm olein, namely refined palm oil and CPO, which are not subjected to export restrictions; so that the raw materials for RBD palm olein are still available. — Bernama photo

KUCHING (April 26): Analysts see some form of reprieve for the palm oil sector as Indonesia has clarified that the export ban only affects refined, bleached and deodorised (RBD) palm olein and not for crude palm oil (CPO) or other derivatives.

Researcher Hoe Lee Leng from RHB Investment Bank Bhd (RHB Research) noted that in 2021, the export volume of RBD palm olein was 12.7 million tonnes, and in January to March 2022, it was 1.5 million tonnes.

“Strict supervision would be needed pertaining to the raw materials for RBD palm olein, namely refined palm oil and CPO, which are not subjected to export restrictions; so that the raw materials for RBD palm olein are still available,” she said in her analysis on the update.

“If there is a shortage of refined palm oil, then export restrictions can also be extended to the remaining products.

“Consequently, we think the recent selldown of several upstream Indonesian and Singaporean listed planters may be overdone, since CPO exports are allowed again.

“Downstream Indonesian planters may look for ways to circumvent this ban by exporting more CPO and RBD palm oil, or even export to Malaysia to be refined and re-exported.”

Based on this latest development, Hoe cited the possibilities of a few outcomes, the first being upstream planters will be able to go back to either selling CPO domestically to refiners or exporting it.

“Optionally, downstream planters can either not refine their products and just export CPO, or only produce RBD palm oil which is still allowed to be exported,” she said.

“Downstream planters that do not change their product mix could be at a disadvantage as there will be a surplus of RBD palm olein in the domestic market – should they sell the olein to bulk cooking oil producers, they will be able to recover the price difference from the biodiesel fund.

“However, if they sell the olein to the branded cooking oil market, prices may be negatively affected by the excess supply to the market.”

The RHB analyst also said Indonesian planters that have downstream capacities in Malaysia may also decide to export CPO to Malaysia to be refined there instead.

“Malaysian downstream planters would also stand to benefit – less competition from the previously lower priced refined products in Indonesia; potentially more CPO supply from Indonesia will likely result in higher utilisation rates for their refineries.”

Analyst Gan Huey Ling from AmInvestment Bank Bhd (AmInvestment Bank) believe that Indonesia’s export ban will not be as detrimental as previously feared as buyers such as India will still be able to purchase palm oil in crude and refined form.

“As exporters are allowed to sell crude palm oil, the CPO export levy will still be used to subsidise Indonesia’s B30 biodiesel policy,” she commented. “According to Intertek, Indonesia exported about 6.2 million tonnes of refined palm oil and 2.7 million tonnes of crude palm oil in 2021.

“We believe that the plantation companies in Indonesia will switch towards exports of crude and refined palm oil instead of olein when the export ban takes place on 28 April 2022. We also think that the export ban is a temporary measure, which may be lifted after the Hari Raya festivities.”