Price movements of CPOTR increased by 8.09% in a week to the level of IDR 14,295/Kg. The driving sentiment is partly due to hopes of recovering Chinese demand due to the opening of regions and the B35 Biodiesel program.
China's National Health Commission said earlier this week it would stop requiring tourists to quarantine from January 8, 2023, in an abrupt policy shift by carrying out plans to open up areas to support its battered economy to fully reopen next year and indicated it would facilitating entry for tourists thus reflecting an easing regarding the zero covid. This is a breath of fresh air for Indonesia's demand for CPO, considering that China is one of the largest importers of palm oil. On the other hand, however, China's hospitals and funeral homes came under intense pressure on Wednesday as the soaring wave of COVID-19 made some countries hesitate and enact testing for travelers from China to prevent COVID-19
The Ministry of Energy and Mineral Resources (ESDM) (28/12) issued a new circular letter stating that the blending of Biodiesel Fuel (BBN) of the biodiesel type with a percentage of 35% (B35) into Fuel Oil (BBM) of the Diesel type will take effect on 1 February 2023 Dadan Kusdiana revealed, "The implementation of B35 is in anticipation of a surge in world oil prices and suppressing diesel imports. The government has also set volume allocations for the B35 program in 2023", so that the prospect of growing demand for palm oil can be boosted by this decision on the biodiesel program and can increase domestic consumption
CPO Reference Price Setting Plan
Indonesia plans to set a CPO reference price for the period 1-15 January 2023 of US$ 858.96 per metric ton, this reference price will decrease by US$ 13 per metric ton. This price is the basis for setting export duties (BK) and export levy rates (PE). The government imposes a CPO export tax of US$ 52 per metric ton and a CPO export levy of US$ 90 per metric ton. As stated in the Decree of the Minister of Trade Number 1598 of 2022 concerning the Reference Price of Crude Palm Oil Subject to Export Duty and the Service Tariff of the Public Service Agency of the Palm Oil Plantation Fund Management Agency. The Director General of Foreign Trade of the Ministry of Trade, Budi Santoso said "the decline in the CPO reference price was influenced by several factors, including a decrease in supply due to the rainy season, the weakening of the IDR exchange rate against the US Dollar, and an increase in demand for competing vegetable oils, especially soybean oil".
From the Indian side, the Government of India has extended the policy for imports of vegetable oil including CPO with lower taxes until March 2024. Where in the previous trade India had reduced import taxes in mid-2021 due to high CPO prices. Currently, the CPO tax in India is 5.5% for the import of crude palm oil. This can support the price of Indonesian CPO because of India's high consumption for Indonesian CPO and India is one of the main importers of Indonesian CPO.
MY - S&P Global Manufacturing PMI DEC
US- FOMC Minutes
US - Unemployment Rate DEC
Source: ICDX Research