By Bernadette Christina

JAKARTA (Reuters – Indonesia may increase its ban against exports refined palm olein if the country faces shortages in derivatives that are used for production of cooking oils, according to information presented to industry representatives and officials at a meeting.

World’s top palm oil exporter has announced that it will stop shipments to refined, bleached or deodorized palm olein (RBD) but will permit crude palm oil, as well as other derivatives, Musdhalifah Machmud, a senior government official, confirmed to Reuters.

Analysts estimate that RBD Palm Olein is responsible for 40% of Indonesia’s palm oil product exports. This means that the ban on exports could have a significant impact on Southeast Asia’s largest economy.

Indonesia usually exports between $2.5 and $3 billion per month of palm oil products.

According to slides, the authorities will closely monitor domestic supplies of crude palm oil and refined palm oil. These are raw materials for RBD olein production.

A slide was given to palm oil companies Monday that stated “If there is a shortage in refined palm oil then additional export bans can being carried out.”

Joko Widodo (President) announced Friday that cooking oil exports would be prohibited. This was to reduce domestic inflation, but gave no further details.

Global edible oil prices have soared due to Indonesia’s announcement. Supplies were already being strained by drought and other factors, such as Russia’s invasion in Ukraine.

Markets believed the ban would be applied to more palm oil products. Monday’s tumble sent both the rupiah and the shares of Indonesian palm oils companies plummeting.

MEETING COOKING OIL PRODUCERS

A source within the industry said that on Tuesday, Indonesia’s economic ministry met with oil producers to discuss its export ban.

Musim Mas, an independent palm oil producer based in Singapore, stated that the ban’s smaller scope showed the government had considered the impacts on smallholder farmers and the sector.

Carolyn Lim, the company’s senior manager for corporate communication, said that the ban might be extended because of its smaller scope.

“The length of time this will go on, that’s also going to have an impact on markets,” she stated.

Analysts believe that the ban will be temporary because of limited palm oil storage.

On Tuesday’s midday, the rupiah recovered 0.35% while shares in local palm businesses traded higher.

Harry Su, the head of equity markets for investment firm Samuel International warned that there could be renewed pressure on the rupeeh due to RBD palm oil being a large part of all exports.

Analysts and politicians have criticised the Indonesian government for its erratic policies to control the rising prices of cooking oil. The country had already instituted and removed an export ban earlier this year.

Euben Paracuelles (Nomura’s ASEAN chief economist) said, “These types of policy announcements are not well communicated adds some of the jitters which are already building.”

The benchmark Malaysian crude palm futures rose 2.8% at 0500 GMT, after the details of Monday’s ban were revealed.