Indonesia takes on Malaysia in battle over palm oil pricing
Palm oil is just the start. Indonesia’s new trade exchange also aims to oversee nickel and coal export volumes, prices and taxes
24/08/2026 (South China Morning Post) - Indonesia produces and exports more palm oil than any other country, but when it comes to setting the price, it still plays second fiddle to Malaysia.
President Prabowo Subianto wants to change that. On August 14, he announced a new exchange for commodities including palm oil, nickel and coal, targeted to begin operations on January 1.
But analysts say dominance in physical supply does not automatically translate into pricing power. Jakarta’s move to set new benchmarks may not be enough to persuade international traders to ditch Bursa Malaysia’s crude palm oil futures contract (FCPO), the industry’s principal reference for pricing and hedging.
The new bourse is part of a broader push by Prabowo for greater state oversight of export prices, volumes and revenue.
“We do not merely want to be a producer of global commodities. We must become a setter for prices of global commodities,” Prabowo told lawmakers during his annual budget speech before Indonesia’s House of Representatives.
The Strategic Mineral and Commodity Exchange (BMKS) will be supervised by the Financial Services Authority, which said on August 19 that it had appointed Henry Rialdi as deputy commissioner responsible for the exchange’s regulation and oversight.
Prabowo said the bourse would establish Indonesian reference prices for major exports – including palm oil, nickel, tin, coal and coffee – and make commodity trading more transparent.
For analysts, palm oil looms as the biggest test of that ambition. Indonesia produced 51.66 million tonnes of crude palm oil last year and accounted for more than half of global exports. Malaysia, the second-largest producer, reported a national output of 20.28 million tonnes over the same period.
Yet despite Indonesia’s exporting clout, Malaysia’s FCPO remains the global industry’s principal benchmark – not just in futures trading, but in negotiations for physical palm oil contracts worldwide.
Siwage Dharma Negara, principal fellow at Singapore’s ISEAS – Yusof Ishak Institute and co-coordinator of its Indonesia studies programme, said Prabowo’s plan appeared to serve two related goals.
The first was leveraging Indonesia’s export dominance in palm oil, nickel and coal to influence international pricing and strengthen its bargaining position.
“The second objective is to give the state better oversight on export prices and volumes, tax payments and possible transfer pricing,” Siwage said.
But he said dominance in supply did not automatically confer benchmark status, as Malaysia’s FCPO had been in use for a long time and was widely accepted in global palm oil trading.
This would not be Indonesia’s first attempt to challenge the status quo. In 2023, it launched an exchange-based physical CPO market run by the Indonesia Commodity and Derivatives Exchange. Trading activity on the exchange has been limited, however, and it has failed to match FCPO on international hedging and price discovery.
David Ng, a proprietary trader at boutique financial derivatives and commodities trading house IcebergX, said FCPO’s appeal came down to deep liquidity.
“If the volume is high, you can go in with size, and you can also come out with size,” he said, noting that the contract attracted plantation companies, physical merchants, international participants and speculators, creating a continuous flow of competing orders.
Last year, 80,399 FCPO contracts were traded daily, according to Securities Commission Malaysia data sourced from Bursa Malaysia.
Ng said that futures and physical prices were closely linked, with physical cargoes typically priced around the FCPO reference, creating built-in incentives for traders to exploit arbitrage.
The challenge now for Indonesia, according to both Ng and Siwage, is not simply publishing a domestic reference price, but creating a market participants trust enough to actually use.
Siwage said competitive transaction costs, transparent governance and reliable data would all be important if Jakarta hoped to challenge the FCPO’s dominance.
“The government may establish the rules, but cannot influence individual prices,” he said, warning that any political intervention in price setting would undermine the exchange’s credibility.
Even if Indonesia could not displace FCPO in international contracts for now, Siwage said mandatory transaction reporting could help it establish a useful physical-market reference.
Ng flagged a further complication: Indonesia’s oil palm plantations are spread across a far larger and more fragmented geography than Malaysia’s, making consistent, reliable data collection a challenge.
Bhima Yudhistira Adhinegara, executive director of the Jakarta-based Centre of Economic and Law Studies, cautioned against viewing BMKS purely as a bid for international price-setting power.
“Prabowo wants to ensure that the price is more transparent and that the government can check transaction data and protect income-tax revenue,” Bhima said.
He drew a comparison with Danantara Sumberdaya Indonesia (DSI), which was established under sovereign wealth fund Danantara to oversee exports of CPO, coal and ferroalloys. Since June 1, exporters have been required to report transactions through DSI, with further changes planned from January.
Bhima was sceptical that establishing a domestic Indonesian benchmark would persuade overseas buyers to abandon established references such as the FCPO.
“To ensure that contracts will use Indonesia’s domestic price reference is very hard,” he said, noting that major export contracts with buyers in China and India already had established pricing arrangements.
But Siwage said that even without dethroning the FCPO, BMKS could still help Indonesia gain better leverage in commercial negotiations, simply by virtue of its position as the world’s dominant palm oil supplier.