On 24 January 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as foreign direct investment as well as updates on various industries such as coal mining, palm oil, geothermal power, oil & gas, cement, ceramics, 4G technology, and more.

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Indonesia turned into a net oil importer in 2004 as domestic oil output declined sharply while domestic fuel consumption surged amid the growing economy (hence becoming more and more dependent on oil imports). Prior to 2016, the Indonesian government provided generous energy subsidies (for fuel and electricity), resulting in a deteriorating budget deficit, trade deficit, current account deficit, and pressure on the rupiah. Moreover, government spending on energy consumption limited room for government spending on productive sectors such as infrastructure and social development.

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The value of Indonesia's exports of crude palm oil (CPO) and its derivatives plunged 11.8 percent year-on-year (y/y) to USD $18.6 billion in 2015 from USD $21.1 billion in the preceding year. However, in terms of volume, Indonesian exports of CPO and its derivatives actually rose 21.7 percent to 26.4 million tons. The higher volume but lower earnings are explained by the palm oil price. Palm oil traded at an average of USD $614.20 per ton in 2015, down 24.9 percent (y/y) from an average price of USD $818.20 per ton in 2014.

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Persistent weak crude oil prices jeopardize smoothness of Indonesia's biodiesel program as cheap oil - currently trading below USD $30 per barrel - reduces demand for biodiesel and makes the biodiesel industry less economic viable. This year the government of Indonesia plans to launch the B20 biodiesel program (one notch up from the existing B15 program), referring to the requirement to blend a mandatory 20 percent of fatty acid methyl ester (FAME, derived from palm oil) with 80 percent of diesel.

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Dewan Minyak Sawit Indonesia (DMSI) memperkirakan ekspor minyak sawit mentah Indonesia (crude palm oil/CPO) turun 8,7% pada basis year-on-year (y/y) menjadi 21 juta ton tahun depan dari estimasi 23 juta ton pada 2015. Penurunan ekspor disebabkan adanya peningkatan konsumsi CPO dalam negeri di tengah implementasi penuh program B15 biodiesel. Konsumsi dalam negeri CPO diperkirakan tumbuh 37% (y/y) dari 8,4 juta ton pada 2015 menjadi 11,5 juta ton pada 2016. Jika program biodiesel B20 akan dilaksanakan, maka ekspor CPO Indonesia bisa semakin menurun.

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Gabungan Pengusaha Kelapa Sawit Indonesia (Gapki) mengatakan ekspor minyak sawit mentah (crude palm oil/CPO) Indonesia berada pada 2,38 juta pada bulan November 2015, turun 8,6% dari ekspor CPO di bulan sebelumnya. Penurunan ini disebabkan karena permintaan yang lebih lemah dari pasar-pasar ekspor utama Indonesia dan harga kacang kedelai yang murah (minyak kedelai bisa menggantikan minyak sawit sebagai bahan dasar untuk pembuatan makanan dan biodiesel). Kendati begitu, pada basis year-on-year (y/y), ekspor CPO Indonesia naik 21% (y/y) menjadi 23,9 juta di periode Januari-November 2015.

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While many of Indonesia's coal producers have ceased operations as the production cost margin turned negative, the country's crude palm oil (CPO) producers are still making a profit despite palm oil prices also having weakened sharply in recent years. The Palm Oil Agribusiness Strategic Policy Institute (Paspi) said that production costs for palm oil producers stand in the range of USD $250 to USD $300 per ton, implying that with current CPO prices at around USD $550 per ton, CPO producers still make a reasonable profit.

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On 29 November 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as updates on inflation, the palm oil industry, purchasing power, the coal mining industry, IPOs, radical Islam, sustainable finance, the timber industry, and more.

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Global crude palm oil (CPO) prices may climb up to USD $800 per metric ton in 2016, from USD $575 per ton (FOB) currently, due to the looming implementation of the B20 biodiesel program in Indonesia and curbed CPO output in 2016. Moreover, global oil prices are expected to rise to around USD $60 per barrel in 2016. Higher petroleum prices should boost demand for biodiesel (diesel blended with palm methyl ester, which is subsidized through the Indonesian government's CPO fund program).

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The El Nino-inflicted dry weather in Indonesia and Malaysia, possibly the worst in nearly two decades, is expected to curtail crude palm oil (CPO) output in both countries, implying that palm oil prices can extend their rally into next year. Moreover, Indonesia will consume more CPO as the government will raise the mandatory amount of palm oil blended with diesel from 15 to 20 percent (part of its B20 biofuel program) in early 2016. Since August - when prices were at a six-year low - palm oil futures have surged 26 percent.

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Palm oil ranks among the most important agricultural commodities of Indonesia as this country is the world’s biggest producer of palm oil. This implies that Indonesia generates important foreign exchange earnings from palm oil exports and is a source of income for millions of workers on the plantations.

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Over the past couple of months we have informed on the shortage of cooking oil on the Indonesian market, the subsequent inflationary pressures this shortage caused, and the policies that were imposed by the government to tackle this shortage. But, we did not devote an entire article to this topic.

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Both Indonesia’s export and import performance was quite amazing in March 2022. While we expected imports to rebound ahead of the start of the Ramadan month (on 1 April 2022), a month that typically gives rise to a big increase in consumption, we did underestimate Indonesia’s export performance in last month’s forecast.

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Although there is plenty of opposition to – and criticism on – Indonesia for allowing crude palm oil (or CPO) to play a big role in the domestic economy (Indonesia being the world’s largest producer and exporter of CPO), the country is currently feeling the windfall from soaring CPO prices. And, it is contributing to Indonesia’s recovery from the severe – and still ongoing – novel coronavirus (COVID-19) crisis.

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Indonesia is the world’s biggest palm oil grower as well as the world’s biggest exporter of crude palm oil (CPO). Traditionally, palm oil exports are ranked among the top three export products of Indonesia (along with coal and natural gas). As such, palm oil is of crucial importance for the Indonesian economy.

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It have not been great times for palm oil farmers and traders. Malaysia’s benchmark palm oil price is currently hovering near a three-year low of 1,949 ringgit (approx. USD $464.8) per ton amid high inventories, rising production and sluggish global demand.

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Several negative sentiments are putting pressure on the crude palm oil (CPO) price in the first week of March 2018. These sentiments are expected to continue pushing downward pressure on the CPO price in the remainder of this week. On Monday (05/03) the CPO price on the Malaysia Derivatives Exchange (May 2018 shipments) fell 0.28 percent to 2,467 ringgit per metric ton. Compared to one week earlier, the price has now declined 2.91 percent.

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In the battle between Indonesia and the European Union (EU) regarding the latter's anti-dumping duties on Indonesian biodiesel exports, Indonesia won six out of seven legal challenges. Indonesia had challenged the EU's duties, set in 2013, on biodiesel imports from Indonesia and Argentina. The World Trade Organization (WTO) ruled, largely, in favor of Indonesia.

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The crude palm oil (CPO) price is expected to strengthen in the first quarter of 2018 due to the impact of the La Nina weather phenomenon and rising CPO demand in the traditional big CPO importing countries. This is good news for stakeholders in the palm oil industry as the price has been sliding around 16 percent so far this year (toward the 2,700 Malaysian ringgit per ton level).

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Foreign exchange earnings are important assets for a national economy. Therefore, many nations have recently been taking a much more protectionist approach vis-à-vis trade in an effort to strengthen their trade positions, generate trade surpluses, hence see the inflow of more foreign exchange earnings. Foreign exchange assets support a stable local currency as well as economy.

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