- Indonesia is key for several London palm oil producers
- Crude palm oil could be excluded
Indonesia, the world’s biggest producer and exporter of palm oil, has announced an export ban on the oil from 28 April. While details of the policy, announced by the country’s agriculture ministry, are currently hazy it could potentially have serious consequences for several London-listed palm oil producers which are reliant on Indonesian operations.
MP Evans (MPE) has plantations in five Indonesian provinces and is focused on producing crude palm oil - the company’s shares are down by 8 per cent since the announcement of the ban. Anglo-Eastern Plantations (AEP), which also has Indonesian operations, is down 11 per cent in the past week. MP Evans had been trading strongly as higher palm oil prices outweighed rising costs, sitting at a record level over 1,000p.
Palm oil is used in a huge range of products, from cakes to shampoo. Around 46mn tonnes of palm oil were produced in Indonesia in 2021, according to the US Department of Agriculture, making it the leading global producer with 60 per cent of global output. More broadly, this equates to a third of global vegetable oil, meaning that the ban could cause major disruption as prices climb further for people already struggling to buy basic goods.
Palm oil prices climbed 9 per cent in the week before the ban, according to Peak Trading Research, on top of a 19 per cent rise in the two months following Russia's invasion of Ukraine.
Indonesian president Joko Widodo said in a video address he wanted palm to be "abundant and affordable" for his citizens. Jokowi, as he is known, previously announced a crude palm oil export ban in February, but reversed this in a matter of weeks, replacing it with a higher export levy. This was increased in March by to up to $200 (£157) per tonne, taking the maximum charge to $375 per tonne.
It is unclear whether crude palm oil will be exempt from the ban. Reuters reported that a letter sent to local government leaders confirmed that refined, bleached, and deodorised (RBD) palm olein exports would be banned but that crude would be excluded. This would be good news for exporters.
Indonesia, the largest country in Southeast Asia, has previously blocked exports of coal and unrefined metals, the former to protect local power plants and the latter to force miners to spend billions on local refining capacity.
