Palm Oil Shipments From Indonesia Seen at One-Year Low on China

Palm oil exports from Indonesia probably fell for a second month in February after demand from China weakened and as the world’s largest palm grower used more of the commodity in biodiesel.

Shipments fell 7.1 percent to 1.95 million metric tons from 2.1 million tons in January, according to the median of nine estimates from analysts, refiners and plantation executives compiled by Bloomberg. That would be the lowest since February 2015, according to data from the Indonesian Palm Oil Association, also known as Gapki.

Palm oil, which bucked a commodities rout last year, is set to reach the highest since 2012 as the strongest El Nino in almost two decades ravages production and squeezes inventories, according to Godrej International Ltd.’s Dorab Mistry. Better-than-expected world energy demand for palm oil with the Indonesian biodiesel program “now functioning well” will boost prices to more than 3,000 ringgit ($728) a ton, he said last week.

Futures retreated 0.7 percent to 2,594 ringgit on Bursa Malaysia Derivatives on Wednesday, paring gains to 4.4 percent this year. Prices rallied to a 21-month high of 2,648 ringgit last month.

Biodiesel Demand

“We started the year with high stockpiles, and now biodiesel will help to gradually curb supply,” said Fadhil Hasan, executive director of the palm association. “The program is running quite well with demand seen relatively stable at around 200,000 kiloliters per month, reducing supply for exports.”

While an economic slowdown in China has weakened demand, Indonesia will rely more on buyers such as India, the European Union and Pakistan for exports, Fadhil said. Shipments may drop to about 24 million tons this year from 26.4 million in 2015 as domestic biodiesel demand increases, Fadhil said at an industry conference in Kuala Lumpur last week.

Production in Indonesia probably totaled 2.04 million tons in February and inventories 2.2 million tons, the survey showed. That compares with Gapki’s January output estimate of 2.99 million tons, which included crude palm and kernel oils, and reserves of 4.36 million tons. January’s data was the first time the association released production and inventory figures. It will publish February data this month.

*Source: Bloomberg survey and Gapki
*NOTE: Figures are in million tons

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net, Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net. To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Thomas Kutty Abraham, Andrew Hobbs

By: Yoga Rusmana and Eko Listiyorini

©2016 Bloomberg News