Indonesia Announces State Monopoly on Commodity Exports, Palm Oil Spot Prices Plunge Over 30% in Two Days

Indonesia's crude palm oil spot prices have plummeted more than 30% over two consecutive trading days this week, following President Prabowo's announcement that state-owned enterprises would have a monopoly on the export of commodities including palm oil. The market saw buyers collectively exit, leading to panic selling by sellers.

The spot tender price for crude palm oil at Indonesia's Dumai Port dropped by about 23% to 11,777 Indonesian Rupiah (approximately $0.67) per kilogram on Wednesday, further falling to around 8,000 Rupiah on Thursday. The share price of AEP Plantations, a London-listed palm oil producer, plummeted by over 20% during Wednesday's morning trading. The benchmark palm oil futures on the Kuala Lumpur exchange fell by 2.5% at one point on Thursday, marking the largest single-day drop in two weeks.

On Tuesday, Prabowo stated in parliament that the export of commodities such as palm oil, coal, and ferroalloys must be centralized under enterprises designated by the government through the sovereign wealth fund, Danantara, with the new regulations to be phased in starting from June 1st.

Officials have said that this move aims to combat the long-standing practice of under-invoicing in export processes, and to strengthen Indonesia’s pricing power in commodities. Trade Minister Budi Santoso stated that the specific regulatory details will be released by this Friday.

According to unnamed traders quoted by Bloomberg, buyers, concerned that the new regulations could slow down delivery processes and lead to stockpiling, have suspended all bidding; some sellers, on the other hand, are heavily discounting their sales in order to clear their inventories before the new regulations take effect.

"The tender报价 for Indonesian crude palm oil has plummeted, with buyers largely turning to a wait-and-see stance," said Warren Tay, a trader at Kuala Lumpur's Eco Palm International. He also noted that Indonesia's relevant authorities might intervene quickly to restore the market to normalcy.

Danantara's CEO, Rosan Roeslani, stated that the regulatory authority will respect existing long-term contracts, but will initiate a review for contracts whose prices significantly deviate from global benchmarks.

Marcello Cultrera, CEO of Malaysia's Apricus 8, stated that on Wednesday, the export price of Indonesian crude palm oil was discounted by about $97.50 per ton compared to Malaysian futures, the largest price gap since February of this year. He pointed out that if the significant discount continues, it could stimulate an increase in Indonesian exports in the short term.

However, analysts warned that if the export management mechanism operates poorly, overseas buyers might turn to alternative sources such as Malaysia, Thailand, and Latin America.

Indonesia is the world's largest producer of palm oil, accounting for more than half of the global supply. Analysts have noted that while Prabowo did not specify the exact categories covered under ferroalloys, the relevant scope might extend to some nickel products, which are key raw materials for stainless steel and electric vehicle batteries.