The decision of the world’s largest exporter of palm oil is forcing manufacturers around the world to draw on their stocks.
The announcement is enough to send fans of the famous spread into panic mode, especially when it comes from the world’s largest palm oil exporter. The Indonesian government, which imposed an export embargo on oilseeds on April 27, caused a temporary increase in the price of various types of oil, particularly palm oil. High inflation and increasing social tensions in the country convinced Indonesian President Joko Widodo to consider supplying the population “top priority” over supplying the importing countries.
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According to Arthur Portier, a consultant at Agritel, Indonesia supplies more than 50% of the world’s palm oil exports. Among the countries most exposed to this embargo, we find in particular India, where 33% of palm oil imports come from Indonesia, and China, for which this figure exceeds 40%. Two countries that therefore urgently need to adapt to keep their food consumption afloat, such as Pakistan and Bangladesh, which are also heavily dependent on these exports. For Europe, almost 47% of imported palm oil comes from Indonesia, compared to 25% from Malaysia.
“A temporary logistical problem”
Large manufacturers also love this oil, which can be found in many cakes, biscuits, but also in cosmetics. The Ferrero Group, which markets the Nutella spread, imports about 20% palm oil from Indonesia, compared to almost 80% from Malaysia. A reassuring number for all Nutella consumers who shouldn’t look at the shelves without their favorite spread. However, given Europe’s heavy reliance on Indonesian exports, the government’s announcement could make traders fear potential inventory shortages.
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For Arthur Portier, however, one does not have to speak of a lack. “The Indonesian government’s strategy has been to relax the price market locally, so there is no reason to continue with this. A simple suspension of exports in May would allow Indonesia to regain two million tons of stocks. It just causes a small short-term hole,” he explains. Even if the importing countries remain directly affected by this export ban, the latter prefer to speak of a “temporary logistics problem” that will be resolved in the next two to three weeks.
For manufacturers in particular, these are also covered by existing stocks that they had anticipated. At worst, this export disruption could cause them to draw more heavily on these stocks and therefore buy back more in June. Still, “in terms of Malaysian and Indonesian equities, all the elements are in place for a return to normality within two to three weeks,” concludes Arthur Portier.
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