Jakarta, Jan 14 – Indonesia has decided to scrap plans to implement a mandatory B50 biodiesel blend this year and will continue with the existing B40 mandate, citing technical and funding constraints, government officials said. The decision has eased earlier concerns over potential tightness in global palm oil supply and weighed on market sentiment.
Indonesia, the world’s largest palm oil producer, had planned to roll out B50 – a fuel blend consisting of 50% palm oil-based biodiesel and 50% conventional diesel – in the second half of the year. Instead, the government will maintain the B40 mandate, which requires a 40% biodiesel blend across most diesel consumption.
Deputy Energy and Mineral Resources Minister Yuliot Tanjung said the B40 policy was sufficient for 2026, especially as diesel output is set to increase following higher production at the Balikpapan refinery. Energy ministry officials added that further trials are still needed for B50 use in sectors such as rail transport, heavy equipment, and industrial machinery.
Indonesia’s biodiesel policy is closely watched by commodity markets, as higher domestic blending rates typically reduce export availability of crude palm oil (CPO). Analysts said the decision to delay B50 is bearish for palm oil prices, as markets had priced in stronger demand from biodiesel producers. Estimates suggested that a B50 rollout could have absorbed an additional 2.2 million tonnes of CPO, on top of the roughly 13.6 million tonnes used for biodiesel last year.
Following the announcement, benchmark palm oil futures in Malaysia fell, reversing earlier gains. The downside pressure was compounded by data showing Malaysian palm oil inventories rose sharply in December to a near seven-year high, exceeding 3 million tonnes.
In parallel with the biodiesel decision, Indonesia announced an increase in palm oil export levies to help sustain funding for its biodiesel subsidy scheme. Starting March 1, the export levy on CPO will rise to 12.5% from the current 10%, while levies on refined palm oil products will also increase by 2.5 percentage points. The proceeds are used by the Indonesian Estate Crop Fund Agency to bridge the price gap between palm oil-based biodiesel and conventional diesel.
Industry groups have offered mixed reactions. The Indonesian Palm Oil Association said maintaining B40 strikes a balance between domestic consumption, export volumes, and price stability. Meanwhile, palm oil farmer groups warned that higher export levies could weaken Indonesia’s competitiveness and prompt global buyers to shift sourcing to alternative suppliers.
Looking ahead, officials said the timing of any future B50 mandate, including a possible rollout in 2027, will depend largely on the price differential between fossil diesel and palm oil-based fuels.
Indonesia’s decision to refrain from implementing B50 biodiesel this year and to maintain the B40 blending mandate has a clear impact on the stearic acid market through the palm oil-oleochemical value chain. Stearic acid is an oleochemical product primarily derived from CPO and palm kernel oil (PKO) via hydrolysis and fatty-acid distillation. As such, any adjustment in Indonesia’s palm oil consumption policy, given position as the world’s largest CPO producer, has a structural influence on stearic acid cost dynamics and supply-demand balance across regional and global markets.
The postponement of B50 reduces expectations for CPO absorption by the biodiesel programme compared with earlier forecasts. As domestic palm oil demand does not rise as sharply as previously anticipated, greater volumes of CPO are structurally available for export and oleochemical processing, although actual export flows remain moderated by higher export levies. This helps to ease potential upward pressure for stearic acid producers, particularly in Southeast Asia and China, regions that rely heavily on Indonesian palm oil. Under these conditions, stearic acid production costs are likely to stabilise, lowering the risk of feedstock shortages and reducing the likelihood of abrupt price spikes caused by supply constraints.
However, this positive effect is partly offset by Indonesia’s concurrent decision to raise palm oil export levies from March. Increasing the CPO levy to 12.5% effectively establishes a price floor in the international market, preventing raw material prices from falling sharply even as biodiesel-related demand pressure eases. For stearic acid, this implies that prices are unlikely to enter a steep downward cycle and will instead remain broadly stable or see only modest adjustments. In practice, higher domestic retention of CPO also supports Indonesia’s oleochemical sector by ensuring continuity of feedstock supply and reducing the risk of production disruptions.
Across the value chain, the net impact of these policy changes on stearic acid is neutral to mildly positive, particularly from a buyer’s perspective. Stearic acid is no longer exposed to the risk of strong upward price pressure that could have emerged under a B50 scenario, while downside risks remain limited by feedstock cost support from export levies. This stability also extends to downstream derivatives such as zinc stearate, calcium stearate, and additives used in PVC, rubber, cable, and footwear applications, as the oleochemical supply chain maintains a relatively balanced supply-demand environment in the short to medium term.
As a manufacturer and supplier of stearic acid, TLD Vietnam is well-positioned to proactively ensure continuous supply and stable pricing. The delay in B50 implementation contributes to a more predictable palm oil feedstock market, reducing the risk of cost volatility across the oleochemical value chain. On this basis, TLD Vietnam remains committed to maintaining a reliable supply and consistent stearic acid pricing for customers in the period ahead.
