Domestic producers of RBD (Refined, Bleached, and Deodorized) palm oil in Indonesia are navigating a challenging landscape in 2025. What used to be a comfortable gross margin of 10–15% is now slipping, pinched by a combination of rising raw material costs and volatile government levy policies. The pressure is real, and the industry is feeling it.

 

The numbers speak volumes. In Q1 2025, RBD palm olein prices in Indonesia hovered around USD 1,020 per metric ton in March, and climbed to USD 1,060/MT by June. This price increase is not isolated. India recorded USD 1,120/MTin March, while Malaysia hit USD 1,150/MT in June—signaling strong regional demand and tightening global supplies. One key reason? Indonesia’s aggressive move to increase its biodiesel blending mandate to B40 in 2025. While this policy supports clean energy, it also diverts large volumes of crude palm oil (CPO) away from food and refining industries, reducing feedstock availability and intensifying competition for supply.

 

 

Mounting Costs Meet Efficiency Gains

The cost of production is rising across the board. Fertilizer, logistics, and energy inputs continue to climb, eroding margins. Major players such as Sawit Sumbermas Sarana (SSMS) reported fertilizer spending reaching IDR 788 billion in 2025. On a positive note, operational efficiency is showing signs of improvement. Oil Extraction Rates (OER)are projected to rise to around 25%, which helps increase crude output from fresh fruit bunches. But even with such gains, domestic pricing regulations are narrowing the gap between domestic and export prices, limiting potential relief.

 

The industry’s financials reflect the strain. Mewah International’s operating profits from bulk products fell by more than 53%, sliding to just USD 32.1/tonne in FY23. First Resources, once profitable, swung from USD 52.6/tonne in FY22to a loss of USD 43.8/tonne in FY23. Compounding the challenge, Indonesia’s refining capacity now reaches 45–50 million tonnes per year, nearly matching CPO production of about 48 million tonnes. This leaves little room for error—and even less for profit.

 

Indonesia’s government continues to tweak export duties and levies to maintain domestic supply while staying competitive globally. In early 2025, export tariffs for RBD palm olein were set around USD 64/tonne, with additional levies reaching USD 12/tonne. While these policies help control cooking oil prices (recently touching IDR 15,500/litre) and fuel biodiesel targets, they come at the cost of squeezing refining margins further.

 

Industry Response: Adjust, Expand, and Innovate

Faced with these hurdles, refiners are adjusting domestic selling prices, though cautiously. Competition from imported oils with lower duties puts a cap on how much they can raise prices locally. As a countermeasure, many are expanding exports and shifting toward higher-margin specialty products like palm olein fractions and bio-based industrial oils. The construction of Apical Group’s new 1 million MT/year refinery in West Sumatra and Mewah’s USD 95 million refinery in Dumai (capacity: 3,500 tonnes/day) exemplifies this push.

 

The future is also tied to biodiesel. With the B50 mandate on the horizon, Indonesia’s biodiesel production capacity, already at 19.7 billion liters in 2024, is set to grow by 1.5 billion liters in 2025, with expectations of an additional 4 billion liters needed to meet future mandates. This expansion will keep CPO demand robust, but also maintain upward pressure on feedstock prices.