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Indonesia’s palm oil export ban to hit SA’s soap and snack makers, hoteliers, and caterers

Business Insider SA
Bottling line of palm oil In bottles. (Getty Images).
Bottling line of palm oil In bottles. (Getty Images).
  • Prices for snacks, detergents, and other consumer products that use palm oil will likely rise.
  • Indonesia, the world's largest vegetable oil producer globally, implemented a ban on palm oil exports last week.
  • South Africa relies on different regions for its oil and imports over 500,000 MT of palm oil, equating to 57% of its fats and oil imports.
  • But, Indonesia may be forced to lift the ban because it won't be able to consume around an excess of 60% of the oil it produces.
  • For more stories go to www.BusinessInsider.co.za.

Indonesia's ban on palm oil exports will be most punishing to sectors manufacturing consumer products in South Africa, such as detergents and snacks, even though temporarily, one of the leading edible oil producers in the country has said.

Because South Africa is a net importer of palm oil, any pressure from the ban will weigh on the supply chain and drive prices up and affect availability, Morné Botes, Southern Oil's Commercial Director, told Business Insider South Africa.

The pressure will be felt mainly by manufacturers of soap and snacks, and the hotel and catering industries in South Africa, he said.

"Palm is seen as a lower-cost solution, and [is] used in detergents, snacks and within the Hotel Restaurant and Catering (HORECA) market segment… The most significant impact can, however, be seen in low-cost products like detergents, soap, and within the quick-service restaurant industry using palm oil for frying," Botes said.

He said the full impact would be dependent on how long the ban lasts.

Palm oil is one of the most versatile oils found, and it is a crucial ingredient in a range of products, including cosmetics, soap, detergents, cleaning agents, and many food products such as chocolate.

"The impact for consumers will be on products using palm oil and or palm oil used in frying. Here the consumers might be forced to move to an alternative brand not using palm products and or be forced to pay a higher price [than] they are currently paying for the product they use," he said. 

Last Thursday, Indonesia, the world's largest palm oil producer, implemented a ban on palm oil exports to curb shortages. The Southeast Asian nation exports almost two-thirds of the world's palm oil.

Its ban comes as demand for the edible oil, which was waning due to sustainability concerns, is now peaking since Russia invaded Ukraine. Countries reliant on these two nations for sunflower oil became forced to turn to palm oil as an alternative, with the war wreaking havoc on the supply of sunflower oil.

About 57% of South Africa's oil and fats imports is palm oil, translating to 550,000 MT.

Botes suggests that the ban's impact will not be sustained for longer than a few weeks, given Indonesia may not be able to absorb the excess oil.

He said that the Indonesian domestic market could only absorb between 35% and 40% of what it produces.

"Any shortage will be short term, as Indonesia will be required to export product as they can only store a certain amount of product and will be forced to export [sell] as they are unable to carry stock."

"In the short term, unfortunately, pricing will be impacted, and alternative options will need to be used which is at higher price levels than palm (ie, Canola, coconut, or Sunflower)," he said.


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