KUALA LUMPUR: The recent launch of Indonesia's nationwide rollout of the B50 biodiesel mandate presents an opportunity for Malaysia to strengthen its existing palm oil markets while expanding its market share in selected destinations.
Malaysian Palm Oil Council (MPOC) chief executive officer Belvinder Sron said Malaysia is expected to benefit from reduced exportable palm oil supplies from Indonesia following the B50 mandate, which is likely to divert more palm oil toward domestic consumption.
"As the world's second-largest palm oil producer and together with Indonesia accounting for around 85 per cent of global palm oil exports, Malaysia is the natural alternative source for importers seeking to secure reliable supplies.
"However, the extent of this benefit will depend on several market factors. Global demand for palm oil is influenced not only by Indonesian export availability but also by the supply and price competitiveness of competing vegetable oils, particularly soybean oil,” she told Bernama.
Belvinder said the full implementation of the B50 mandate would require an additional three million tonnes of palm oil annually, increasing palm oil demand for biodiesel to around 16 million tonnes and total domestic consumption to about 26 million tonnes. This is equivalent to 52 per cent of Indonesia’s 2025 palm oil production.
"This would leave only 48 per cent of its production available for export. This is a significant change compared with 2019, when Indonesia’s biodiesel mandate was B20 and the country exported around 68 per cent of its annual palm oil production.
"This shift is already reflected in global trade. Palm oil accounted for around 56 per cent of the global oils and fats trade in 2019, but its share declined to 49 per cent in 2025,” she added.
According to reports, Indonesia's new B50 biodiesel mandate took effect on July 1, requiring diesel fuel to contain a 50 per cent blend of palm oil-based biodiesel, up from the previous 40 per cent blending requirement.
Belvinder noted that a higher biodiesel mandate tends to provide a structural floor for crude palm oil (CPO) prices, as more palm oil is absorbed by the domestic market, reducing the volume available for export.
Therefore, she said CPO prices will continue to be influenced mainly by global supply-demand dynamics.
"The availability and price performance of soft oils, energy prices, geopolitical developments, and changes in trade policies will also shape the long-term price outlook.
"For the second half of 2026, CPO prices are expected within the range of RM4,300-RM4,700 per tonne, supported by a tighter supply outlook in Indonesia and growing El Nino risks,” said Belvinder
Nevertheless, CPO price gains may be capped by elevated vegetable oil inventories in key importing markets such as China and India. "Biodiesel economics have also become less supportive, as gasoil prices have fallen below palm oil prices in the futures market,” she added. - Bernama
