A worker carries oil palms into the truck in Mesuji Raya, Ogan Komering Ilir, South Sumatera, on June 9, 2019. (Antara Photo/Budi Candra Setya)

Gapki Expects Tight Supply to Support Palm Oil Price Into 2021


NOVEMBER 27, 2020

Jakarta. The price of crude palm oil enjoys a significant rise thanks to the tight supply amid the Covid-19 pandemic, and the condition will persist well into the first half of 2021, according to the Indonesian Palm Oil Association, or Gapki.

Gapki's chairman Joko Supriyono, Indonesia's free-on-board CPO price surpassed $870 per ton this month, the highest level in three years, in line with the decline in production.


"As of September, the production in Indonesia is at a negative 5 percent compared to last year," Joko told the Jakarta Globe in an online media visit on Thursday.

Also, "the high price is possible due to the tight supply as Malaysia's production is declining. I expect the price will remain high in early 2021," Joko said.

The Indonesian CPO price has risen by 74 percent to $880 per ton on Monday, from its lowest point of $507 per ton, data compiled by Singapore-based publisher Palm Oil Analytics. 

The government's mandatory use of B30—a diesel fuel made of 30 percent palm oil biofuel—also caused keep the crude palm oil demand in check, Gapki deputy chairman Togar Sitanggang said. "At least until the first semester of 2021, the price would stay around $870 [per ton]," he said.  

The pandemic becomes a blessing in disguise for palm-based oleochemicals used in soap and hand sanitizers. Exports for oleochemicals jump by 20 to 21 percent. The domestic market also saw a 2.8 percent year-on-year growth as of September, thanks to demand for oleochemicals.

"Even so, our export is at a negative 12 percent because our markets are under lockdowns. Palm oil export for food has declined because restaurants have closed. But overall, the palm oil industry is doing well from a business perspective," Joko said.