Indonesia’s upcoming implementation of the B40 biodiesel program, raising palm oil content in biodiesel from 35% to 40% starting Jan. 1, 2025, is poised to drive up palm oil prices and reshape global market dynamics. The B40 policy is expected to support palm oil prices in 2025 by increasing domestic demand and tightening global supplies. Experts predict crude palm oil (CPO) futures could exceed 5,000 ringgit per metric ton ($1,130) in early 2025, with potential for a 10% to 15% price rally in early 2024 if the plan proceeds as scheduled.
- Biodiesel allocation: Projected at 15.62 million kiloliters for 2025, up from 13.4 million kiloliters under B35.
- Palm oil use: Energy-related consumption could surge to 13.9 MMT, a significant increase from 11 MMT under B35.
- Export declines: Indonesia’s palm oil exports dropped 10% in November 2024, with further declines expected as B40 preparations intensify.
- Production limits: Slower production growth raises fears that global supply may not keep pace with escalating demand.
Gradual implementation is anticipated, with full adoption potentially delayed until 2026. Industry experts question feasibility due to tight CPO supplies, subsidy pressures, and the need for export levy restructuring. While B40 could cut CO₂ emissions by up to 40 MMT annually, environmentalists warn of deforestation risks, with potential clearing of 1.5 million hectares of forest by 2039 to meet rising demand.
