Indonesian commodity controls trigger panic, palm oil spot prices plunge over 30% in two days.

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Indonesian President Prabowo announced national control over commodity exports, causing dramatic market turmoil. The spot price of Indonesian palm oil has dropped by more than 30% in two trading days.

On May 20, Prabowo announced in parliament that the government would establish a state-owned enterprise as the sole exporter of multiple commodities such as palm oil, coal, and ferroalloys. All exports must be carried out through government-designated companies under the sovereign wealth fund Danantara, and the new regulations will be implemented in phases starting June 1.

After the announcement, the spot bidding price for crude palm oil at Indonesia's Dumai port plummeted about 23% to 11,777 rupiah per kilogram (about $0.67) on Wednesday, and further dropped to about 8,000 rupiah on Thursday—a cumulative decline of over 30% in two days.

The impact of this policy has spread outward. On Thursday, the benchmark palm oil futures on the Kuala Lumpur Exchange dropped as much as 2.5% intraday—the largest single-day drop in two weeks. The shares of London-listed palm oil producer AEP Plantations plunged more than 20% in early trading on Wednesday.

Policy Core: Monopolize Exports, Combat Fraud

During his speech in parliament, Prabowo stated clearly, "The sale of all our natural resources—from palm oil, coal, to ferroalloys—must be conducted through government-designated state-owned enterprises as the sole exporter, and the prices of all commodities must be decided in our own country."

This move aims to curb long-standing behavior of underreporting invoices for exports and give authorities greater pricing power. Indonesian Trade Minister Budi Santoso said specific regulatory details for palm oil, coal, and ferroalloy exports would be issued before Friday. Danantara CEO Rosan Roeslani said regulators will honor existing long-term contracts, but if contract prices are below the global benchmark, they will review those contracts.

Prabowo did not specify the scope of ferroalloys, but analysts pointed out that the relevant scope may cover some nickel products—nickel is a key raw material in stainless steel and electric vehicle battery manufacturing.

Market Panic: Buyers Wait, Sellers Dump

Bloomberg cited unnamed traders saying that the sharp drop in spot prices directly reflects market chaos. Buyers, fearing the new regulations might delay shipments and cause inventory buildup, have pulled out from auctions; meanwhile, some sellers are quickly clearing out stocks ahead of the new rules by aggressively cutting prices.

Warren Tay, a trader at Kuala Lumpur's Eco Palm International Sdn., said, "Bid quotes for Indonesian crude palm oil have dropped sharply, and buyers are mostly on the sidelines." He also pointed out that Indonesian authorities might intervene quickly to help the domestic palm oil market return to normal.

Indonesia's daily spot quotes are a real-time indicator of domestic supply and demand, offered by state-linked plantation groups via a local bidding system to refiners, traders, and exporters.

Widening Price Gap, Short-term Export Competitiveness Boost

Marcello Cultrera, palm oil trader and CEO of Malaysian agricultural software company Apricus 8 Sdn., said that Indonesian crude palm oil export prices were discounted by about $97.50 per ton compared with Malaysian futures on Wednesday—the biggest price gap since February. He said if this steep discount continues, it may trigger a phase of surging Indonesian exports.

However, in the medium to long term, risks go the other direction. If export management turns chaotic, overseas buyers may turn to other competing origins such as Malaysia, Thailand, and Latin America. Indonesia is the world’s largest palm oil producer, accounting for over half of global supply. Any major changes in its export policy will have profound effects on the global edible oil market.

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