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Palm Oil Producers Under Fire Following EU Restriction

This Wednesday (14/8), the European Commission, the executive branch of The European Union, will officially enact the planned tariffs on biodiesel products coming from Indonesia, with duties ranging from 8-18% depending on the product. The tariff was proposed back in March in order to counteract the alleged subsidies the Indonesian government has given to biodiesel producers. The move is seen by the commission as a step towards EU’s renewable-energy movement and to give room in the market for local producers. However, Indonesia is ready to counter against what they see as “discriminatory” rules that are forced upon the country as the main supplier of crude palm oil in Europe, with 85% of the product coming from the Southeast Asian nation. Indonesia has warned that the EU restrictions would severely jeopardize the nation’s palm oil industry.

The issue of anti-subsidies tariff for palm oil products has been a common discussion among Indonesian producers, as the EU has opened the subsidy inquiry since December. However, according to the General Chairperson of the Indonesian Biofuel Producers Association, Master P. Tumanggor, the alleged nine subsidies charged by the European Union were seen as forced fabrications in order to move forward with the tariffs. In response, the Indonesian Biofuel Producer Association and the government is preparing a lawsuit inquiry to the World Trade Organization regarding the matter. Furthermore, the Minister of Trade, Enggartiasto Lukita has proposed retaliatory levies for EU dairy products for as much as 25%. The ongoing trade tensions may blow up if both sides cannot agree on an answer, with many economists labeling the situation as a “mini trade-war” that still brings threats of trade meltdowns between Indonesia and the EU.

The effect of the imposition was directly seen in a lot of palm oil producers in the stock market. During the day (14/8), CPO issuers at the closing of the first session were immediately corrected, which include: PT Eagle High Plantations Tbk / BWPT (-3.87%), PT Sawit Sumbermas Sarana Tbk / SSMS (-1.56%), PT Dharma Satya Nusantara Tbk / DSNG (DSNG ( -1.64%), PT Sampoerna Agro Tbk / SGRO (-0.86%), PT. Salim Ivomas Pratama Tbk / SIMP (-0.56%), and PT Tunas Baru Lampung Tbk / TBLA (0.56%). The decline in these shares caused the agriculture sector to slip by 0.36% to 1,406. However, the light at the end of tunnel may already be seen, as President Joko Widodo has asked stakeholders to speed up the mandatory proportion of diesel blended with crude palm oil (CPO) from 20 (B20) to 30 percent (B30) by January next year, hence pushing up the domestic use of palm oil. Coincidentally, China will remove import tariffs for palm oil, opening up a new market for Indonesian producers. The answer for the worsening relations between Indonesia and the EU, however, remains to be seen.


CNN Indonesia


CNBC Indonesia

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