New mandate may add 3 million tonnes of demand—and serious pressure on exports

Indonesia is preparing to take another major step in its biodiesel journey. Following the nationwide rollout of its B40 mandate in July 2025, the government is now actively studying a B50 biodiesel blend, which could be implemented as early as 2026. If approved, this move could drive an additional 3 million tonnes of domestic palm oil demand annually, according to CIMB Securities — a game-changer for both edible oil and oleochemical markets across Asia.

 

 

The policy momentum is clear. Over the past decade, Indonesia’s blending mandates have grown quickly — from B20 in 2016, to B30 in 2020, B35 in 2023, and now B40 in 2025. The Energy and Mineral Resources Ministry recently confirmed feasibility studies are underway, with Pertamina conducting B50 pilot tests. Political backing also appears strong, with President-elect Prabowo Subianto positioning higher biodiesel blends as part of a broader push for energy independence and rural development.

Rising Domestic Demand and Supply Challenges Ahead

 

The potential implications for palm oil supply are significant. In 2024 alone, Indonesia used 26.1 million tonnes of palm oil for biodiesel. A shift to B50 could raise that figure to nearly 29 million tonnes per year, cutting deep into volumes traditionally destined for export. With crude palm oil (CPO) production plateauing around 47 million tonnes, industry players are concerned that supply won’t keep up.

This has already begun to influence prices — CPO futures recently traded above MYR 4,250 per tonne, per TradingEconomics. Production challenges, including aging plantations and limited land expansion, are adding more pressure. At the same time, refiners are warning of infrastructure gaps. To support B50, biofuel producers will need to boost esterification capacity by at least 1.5 billion litres per year — a significant investment that will require government support, faster permitting, and better incentives.

GAPKI, Indonesia’s palm oil association, has cautioned that unless productivity improves, biodiesel policies could reduce exports by up to 6 million tonnes annually. Business groups are also flagging feedstock concerns, while urging the government to balance energy policy with agricultural sustainability.

Impacts on Oleochemicals and What to Watch

While more biodiesel production could temporarily boost bio-glycerine output, rising feedstock prices may cancel out any cost advantages for downstream processors. Refined glycerine, fatty alcohols, and stearic acid producers will likely see tighter margins, especially if competition for palm-based feedstocks intensifies.

Environmental critics, meanwhile, have raised red flags around deforestation and land use — though government officials argue the policy supports carbon credit markets and reduces dependency on fossil diesel imports.

Looking ahead, the government aims to finalize regulatory changes by early 2026, with pilot programs expected in select provinces before a nationwide rollout by 2027. For industry stakeholders, this is a pivotal moment. The potential for delays in infrastructure build-out—or an accelerated launch—makes it critical to plan across multiple scenarios.

In a tightening market, proactive supply chain planning, scenario analysis, and sourcing diversification will be key to staying competitive and resilient.