Indonesia’s B50 delay clouds CPO demand outlook, analysts put 2025 price forecasts under review

KUCHING (Jan 14): The Indonesian government’s decision to hold off on implementing the B50 biodiesel mandate in 2026 could alter the supply-demand balance for crude palm oil (CPO), raising downside risks to prices and prompting analysts to reassess earnings assumptions across the plantation sector.

To recap, Indonesia’s B50 mandate, which requires a 50-50 blend of palm-based fuel and diesel, was expected to begin in the second half of 2026 (2H26).

However, Coordinating Minister for Economic Affairs Airlangga Hartarto has said that the Indonesian Government may not implement the B50 mandate in 2026 as its launch date would depend on the price gap between crude oil and CPO.

In an interview with Reuters on Jan 13, Airlangga Hartarto said, “We are preparing for (implementation) in the second semester, however under current price conditions, the president’s directive is (to maintain) B40, but be ready for B50.”

To this end, he guided that the Government will continue to monitor the price difference between fuel oil and palm oil prices.

According to analysts from RHB Investment Bank Bhd (RHB Research), Indonesia is likely to maintain the current B40 biodiesel mandate for now, as authorities continue to study the technical impact of higher blends on automotive engines and monitor funding sustainability amid volatile palm oil and gas oil price spreads.

Airlangga Hartarto’s comment indicated that funding remains a central challenge to the B50 mandate as a full-year B50 mandate would require a sharp increase in palm oil export levies.
RHB Research estimates that based on prevailing palm oil–gas oil spreads, charges on refined products woud potentially need to to rise to at least 13.3 per cent from the current 7.5 per cent.

Airlangga Hartato confirmed that new levy rates would be announced in the coming days.

While preparations for B50 are still ongoing, any full-scale rollout is now expected no earlier than the second half of 2026, if at all.

Should the B50 mandate be pushed beyond 2026, RHB Research guides that the immediate effect would be lower CPO demand and prices than previously projected.

RHB Research had previously assumed that around two million tonnes of additional CPO would be absorbed during the 2H26 due to the B50 mandate. Without this, Indonesia’s palm oil surplus could widen, exerting downward pressure on global CPO prices.

“This is a negative development for CPO prices, and we may likely need to review our supply and demand estimates, following this news,” said the analyst who’s current CPO price assumption for 2026 sits at RM4,250.

“We will wait and see what the levy changes are, and monitor further news flow on this before making the necessary changes to our price assumptions,” they said.