China is snapping up discounted cargoes of Indonesian palm oil as buyers take advantage of lower prices following Jakarta’s overhaul of its commodity export system, according to a Business Times report citing a Bloomberg article.
Chinese buying from Indonesia, the world’s biggest palm supplier, had spiked since Indonesian President Prabowo Subianto announced plans on 20 May to centralise exports of key commodities as part of efforts to boost state revenues and tighten the country’s grip over its natural resources, the 4 June report said.
Although required to begin reporting sales from 1 June, exporters could continue to ship product overseas in a transition phase until 1 January 2027, Business Times wrote.
In the two weeks since Indonesia announced its new policy, at least 18 – possibly up to 30 cargoes of palm olein – had been booked, the 4 June report quoted sources familiar with the deals as saying, with most scheduled for delivery in June and July.
More purchases were taking place in the week following the new export system’s introduction as buyers took advantage of attractive price margins after olein futures on China’s Dalian Commodity Exchange rallied, the unnamed sources said.
The volumes were unusually large and reflected a scramble to secure low-cost cargoes from Indonesian producers, who were rushing to sell before the country’s new export framework was fully implemented, two sources said.
According to customs data, China typically imports about 17-18 cargoes/month of Indonesian palm oil.
Buyers in India – the world’s biggest vegetable oil importer – have also been mopping up discounted Indonesian cargoes, according to the report.
According to an earlier Bloomberg report, shortly after the Indonesian announcement, companies in India had ordered around 100,000 tonnes of crude palm oil (CPO) for shipment in June.
Although there had been a spike in Indonesian exports in the short term, traders and investors remained cautious about the long-term impact of Jakara’s new system, which could lead to higher prices and a drop in shipments, Business Times wrote.
Indonesia’s new export system was also impacting neighbouring Malaysia – the second largest global palm oil producer – where palm oil exports were expected to decline for a third consecutive month in June due to increased competition from Indonesia, the report said.
Olein, the liquid fraction of palm oil used as cooking oil and in food processing, was one of the most actively traded palm products in Asia, the report said.
According to data from cargo surveyor Intertek Testing Services, refined, bleached and deodorised palm olein accounted for the largest share of Indonesia’s palm oil exports last year.
