CPOTR Price Increase Driven by Decline in Malaysian Palm Oil Supplies and Prospects for Sustainable Biofuel Demand

The ICDX CPOTR contract price 19/2 – 23/2 experienced an increase of 4.86%.
Malaysia's palm oil inventory at the end of January experienced a decrease of 11.83%.

Market Review

The CPOTR price movements increased within a week to IDR 12,500/Kg, triggered by a decrease in Malaysian palm oil supplies and expectations of increasing CPO demand for the use of sustainable biofuels.

The Malaysian Palm Oil Board reported that Malaysian palm oil stocks at the end of January fell by 11.83 percent compared to the previous month due to a 9.59 percent decrease in crude palm oil production. Meanwhile, entering the month of Ramadan, India is expected to be the largest producer and user, increasing exports until Hari Raya in April.

Demand for crude palm oil (CPO) is expected to increase after flights from Singapore will require the use of sustainable fuel (biofuel) starting in 2026. Singapore's Minister of Transport, Chee Hong Tat, stated that the impact of this policy will increase demand for sustainable fuel producers, providing a positive signal for production. Apart from Bioavtur, the use of CPO is also for 35% biodiesel (B35) biofuel (BBN). Since August 2023, B35 has officially increased from the previous B30, meaning that the mixture of palm oil included in the raw material has increased from 30% to 35%. In the future, the government plans to increase this mixture percentage from 35% to 40%.

Market View

Estimated Production Stagnation and Export Decline in 2024 Following an Increase in Domestic Consumption

The Indonesian Palm Oil Entrepreneurs Association (GAPKI) recorded that crude palm oil (CPO) production in 2023 would reach 50.07 million tonnes, an increase of 7.15 percent from 2022's 46.73 million tonnes. Meanwhile, GAPKI Chairman Eddy Martono stated that production in 2024 is expected to stagnate, and export volume is expected to decline, especially due to increasing domestic demand. Domestic consumption is expected to increase, especially for food needs, the oleochemical industry, and energy needs (biodiesel). The effective implementation of the Biodiesel (B35) policy in July 2022 has increased palm oil consumption by 17.68 percent, from 9.048 million tonnes in 2022 to 10.65 million tonnes in 2023.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date	Data/Events	Actual	Ekspektasi	Sebelumnya
27-Feb	MY - PPI YoY	-0.6%	-	-1.3%
27-Feb	US - Durable Goods Orders MoM	-6.1%	-0.3%	-4.5%
28-Feb	US - GDP Growth Rate QoQ 2nd Est Q4	-	4.9%	3.3%
29-Feb	US - Core PCE Price Index MoM	-	0.1%	-

Source: ICDX Research