Indonesia hikes palm oil export levy: What it means for global markets

14-May-2025 03:14 PM

Indonesia hikes palm oil export levy: What it means for global markets
★ Indonesia, the world’s largest palm oil producer, has announced a hike in export levies on crude palm oil (CPO) starting May 17, raising the rate from 7.5% to 10%. The move is aimed at boosting funds for the country’s biodiesel program and the replanting of old palm plantations.
★ In January 2025, Indonesia increased the biodiesel blending mandate to 40%, requiring more palm oil to be diverted for domestic fuel use. The reference price for May has been set at \$924.46 per ton.
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Market impact:
★ Exporters are likely to pass on the higher levy costs to buyers, which may lead to increased global palm oil prices.
★ Apart from the levy, exporters must also pay a separate export tax to the customs department.
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New export levy rates:
★ Crude palm olein: up from 6% to 9.5%
★ Refined, bleached and deodorized (RBD) palm olein: up from 4.5% to 7.5%
★ Biodiesel: up from 3% to 4.75%
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Impact in Indian rupees:
★ Based on the current exchange rate of 1 USD = Rs. 85.27:
★ CPO is now Rs. 1,971.48 per ton more expensive
★ RBD palm olein has increased by Rs. 2,364.58 per ton
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~Conclusion:
★ This move by Indonesia is expected to tighten global supply, especially as more palm oil is diverted for domestic biofuel use. Countries like India, one of the largest importers of palm oil, could face higher import costs, leading to potential inflationary pressure on edible oil prices domestically.