18/01/2026 (Business Today) - Indonesia will maintain its B40 biodiesel blending mandate in 2026, delaying plans to move to a higher B50 blend as elevated crude palm oil (CPO) prices continue to weigh on subsidy costs and fiscal capacity, according to CIMB Securities.

Citing statements by Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto, CIMB said the government is operationally preparing for a possible B50 implementation in the second half of 2026, but for now will keep the mandate at 40%. B50 remains a contingency option, subject to developments in the price spread between crude oil and CPO.

Indonesia, the world’s largest palm oil producer, had earlier signalled plans to raise the biodiesel blending mandate to 50% from the current 40% in 2H26. However, the biodiesel programme is funded by palm oil export levies, with subsidy requirements closely tied to the crude oil–CPO price differential. Higher CPO prices have increased the fiscal burden of subsidies, making a higher blending mandate more challenging to implement.

For 2026, Indonesia’s Energy Ministry has allocated 15.65 million kilolitres of palm-based biodiesel, of which 7.45 million kilolitres will be subsidised by the plantation fund. Separately, an Energy Ministry official indicated that Indonesia is likely to raise its palm oil export levy, with a decision expected in the coming days, according to Airlangga.

CIMB said the decision to stick with B40 is negative for CPO prices, as it points to weaker-than-expected demand growth. While not entirely unexpected, the move reinforces concerns over the elevated CPO–gasoil price spread, with CPO futures currently trading at an estimated premium of around US$370 per tonne over ICE Brent gasoil, compared with about US$300 per tonne in October and November 2025.

The wider price spread has raised the cost of biodiesel subsidies, prompting a more cautious policy stance from the Indonesian government. Markets had been anticipating B50 implementation in 2H26 as a key demand-side catalyst, which CIMB estimates could have increased Indonesia’s palm oil consumption by up to 3 million tonnes.

The negative outlook is further compounded by plans to raise palm oil export levies, which would likely pressure domestic CPO prices and weigh on producers with exposure to Indonesian estates, particularly amid rising palm oil stockpiles in major producing countries. Adding to policy uncertainty, President Prabowo Subianto has also indicated that Indonesia may seize an additional 4 to 5 million hectares of palm oil plantations in 2026.

Against this backdrop, CIMB maintained its 2026 CPO price forecast of RM4,000 per tonne.

https://www.businesstoday.com.my/2026/01/18/negative-on-cpo-prices-after-indonesias-b50-delay/