Indonesia’s Biodiesel Mandate Could Emerge As Catalyst For Palm Oil Sector
24/03/2026 (Business Today) - Indonesia’s proposed B45/B50 biodiesel mandate is emerging as a key growth catalyst for plantation stocks, according to RHB Investment Bank Bhd (RHB Research).
After consultations with the Indonesia Biodiesel Producer Association, RHB Research highlighted key factors influencing the mandate: Successful automotive and rail engine trials, funding availability, production capacity, Pertamina’s new Balikpapan refinery and potential revisions to biodiesel pricing formulas.
Funding and Capacity Adequate
RHB Research noted that at the current POGO spread of US$11/bbl, sufficient funding exists for B50 implementation even without 2025 carryover funds. Indonesia’s current biodiesel capacity of 22.05 million kL/year is adequate, with utilisation projected to rise to 82% under B45 and 91% under B50.
Pertamina Refinery and Diesel Supply
The US$7.4 billion Balikpapan Refinery, with 43% diesel output, will support local supply as Indonesia phases out diesel imports in 2H26. A higher mandate may reduce refinery utilisation, requiring the government to balance cost savings with refinery profitability.
Pricing and Input Costs Under Scrutiny
Rising methanol prices, up nearly 30% amid Middle East tensions, could pressure biodiesel margins. APROBI flagged potential adjustments to the fixed CPO-based pricing formula and export levies, with market-linked pricing a possible future consideration.
On that note, RHB Research retains a ‘Neutral’ sector call, with crude palm oil prices projected at RM4,250/tonne for 2026, while noting that the timing and structure of the B45/B50 mandate will remain a key driver for Indonesian-exposed plantation companies.
The analysis underscores that while short-term costs and refinery dynamics may constrain margins, the mandate provides a long-term structural boost to demand for palm oil in biodiesel production.
The research house has highlighted Johor Plantations Group Bhd, Sarawak Oil Palms Bhd, IOI Corp Bhd, PP London Sumatra Indonesia, SD Guthrie and First Resources as top sector picks.