(May 20): Indonesian palm oil and coal stocks tumbled on Wednesday on the prospect of tighter state control over commodity exports from Southeast Asia’s largest economy.
The Indonesian government is considering setting up a state-backed agency to manage raw material exports, Bloomberg reported late on Tuesday, citing people familiar with the matter. The entity will be supervised by Danantara, the sovereign wealth fund that reports directly to President Prabowo Subianto, the people said.
Palm oil producer First Resources Ltd fell as much as 9.3% in Singapore, after plunging 13% on Tuesday. PT Perusahaan Perkebunan London Sumatra Indonesia was down as much as 2.6% in Jakarta, after losing almost 8% on Tuesday, before reversing declines.
The plan would mark one of Prabowo’s boldest efforts yet to boost state revenue as he pushes ahead with costly flagship policies, including a nationwide free school meals programme. However, it threatens to increase global prices of raw materials like palm oil, of which Indonesia is the biggest producer, and coal.
Benchmark palm oil futures steadied in Kuala Lumpur after climbing around 4% over the previous three sessions, as traders waited for details on the plan. Indonesia accounts for more than half of global palm oil exports, and prices for the crop have climbed this year as the war boosts demand for its use in biofuel. That was already expected to weigh on the nation’s overseas sales of the edible oil.
See also: Palm oil markets split as Indonesia export revamp confuses trade
The government has also seized more than four million hectares, or roughly 10 million acres, of land since Prabowo took office, including plantations, mine concessions and processing facilities. The moves are part of a push to improve land management, but the swiftness has raised questions on the impact on commodities production.
Indonesian coal stocks were also down. PT Alamtri Resources Indonesia dropped as much as 4.7% and PT Bumi Resources fell as much as 3.8% before reversing declines.
More than half of China’s coal imports come from Indonesia, and industries that consume the fuel may accelerate the search for alternative sources, including supply from Russia, Mongolia and Australia, Chinese consultancy Today Think Tank Energy Co said in a note posted on WeChat.
See also: Palm oil extends advance as crude’s rally boosts appeal of biofuels
Prabowo is expected to announce the 2027 budget framework later on Wednesday, at which he may give details of the commodities plan.
Uploaded by Tham Yek Lee
