PALMOILMAGAZINE, NUSA DUA, BALI — Indonesia’s palm oil industry posted solid performance throughout January–August 2025, according to discussions at the 21st Indonesian Palm Oil Conference and 2025 Price Outlook (IPOC 2025) held in Bali. Stakeholders highlighted rising production, consumption, and exports, while underscoring the need for a strategic response to shifting global demand patterns.
Fadhil Hasan, Head of International Relations at the Indonesian Palm Oil Association (GAPKI), reported that national palm oil production grew 13% compared with the same period in 2024, while domestic consumption increased 5%. However, he pointed out an imbalance in export distribution.
“Key markets such as the European Union and India experienced declines, reflecting an increasingly fragmented global market driven by policy shifts, tariffs, and tightening sustainability regulations,” Fadhil noted during his presentation.
Despite this, Indonesia’s palm oil exports showed strong recovery, rising 15% in January–August 2025, with notable growth in shipments to Russia, Malaysia, and Bangladesh. Even so, weakening exports to the EU and India remain a concern due to their links to sustainability issues and stricter deforestation-related regulations.
“The industry now faces more complex challenges. Beyond market dynamics, sustainability standards in destination countries are increasingly shaping our market access,” he added.
Shifting Demand in China: Stronger Push for Certified Palm Oil
China, one of the world’s largest palm oil markets, is undergoing a structural shift in demand. According to Fadhil, major companies in China are increasingly prioritizing certified palm oil—especially RSPO-certified products—even though government regulations do not yet make such certification mandatory.
This shift is driven by global supply chain requirements and growing consumer awareness of environmentally responsible products. As a result, China’s market is now split into two emerging segments: price-sensitive buyers and premium buyers who prioritize certified products.
Fadhil explained that certification adds an additional cost of around USD 10–15 per ton, but also opens opportunities for producers able to meet these standards. He emphasized that broader international recognition of Indonesia’s own certification system, ISPO, would strengthen Indonesia–China trade relations.
China’s Deflation Pressures: From Consumer Market to Bioenergy Exporter
In the same session, Ryan Chen of Cargill Investments (China) Limited noted that the Chinese economy remains under deflationary pressure, with a persistently negative GDP deflator. This keeps prices low and weighs heavily on consumption—including vegetable oil consumption.
“Domestic demand remains weak, so palm oil consumption has yet to show signs of growth in the near term,” Chen said.
He added that China’s exports to the United States continued to decline throughout 2025, while domestic consumer confidence has not recovered. These conditions, he said, require industry players to adjust strategies because global trade dynamics—particularly China–US relations—will significantly influence future demand.
Chen also highlighted that China’s vegetable oil processing capacity continues to expand, shifting the country’s role from a major consumer to a processor and re-exporter.
This opens wide opportunities for exports of products such as Hydrotreated Vegetable Oil (HVO), Sustainable Aviation Fuel (SAF), and soybean oil, as long as demand from the United States and Europe remains strong.
“China is transitioning from a consumption-focused market to a processing and re-export hub,” Chen concluded.
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