Indonesian Palm Oil Industry to Rely on Domestic Demand

Growth in demand for Indonesian palm oil this year will be driven by domestic consumption as exports drop amid the COVID-19 pandemic, according to the Indonesian Palm Oil Association (Gapki). 

Indonesia, the world’s top palm oil producer, is expected to raise domestic consumption by a slight 1.2 percent year-on-year (yoy) to 15.8 million tons in 2020, Gapki data revealed on September 01. The growth will be entirely driven by the government’s 30 percent palm oil-mixed biodiesel (B30) program, which is expected to offset lower domestic demand for palm-oil based groceries, similar data reveal.  

Palm oil, which is Indonesia’s second biggest export behind coal, is regularly touted as a solution to the country’s gaping trade deficit, yet Gapki’s data show the palm oil industry is bracing for an about turn in terms of export volume this year. The commodity’s exports will drop 18 percent year on year to 24.92 million tons this year, mainly as the European Union, China, and India shudder from the ongoing coronavirus pandemic, according to Gapki. The three key markets account for half of the country’s total exports.