ASIATODAY.ID, JAKARTA — Indonesia’s palm oil industry has lost momentum in China, with exports of its flagship palm products falling sharply in the first five months of 2026 even as shipments of nickel, steel, and other mineral commodities continued to expand.
The latest trade figures point to a significant shift in the composition of Indonesia’s exports to China, where critical minerals linked to the global energy transition are increasingly replacing palm oil as the principal engine of bilateral trade growth.
According to Indonesia’s Central Statistics Agency (BPS), China’s imports from Indonesia increased 17.68% year-on-year to US$28.54 billion during January–May 2026. The overall increase, however, was driven largely by mineral commodities, while exports of several major palm-based products recorded steep declines.
The biggest setback came from refined palm olein (HS 15119010), Indonesia’s largest palm oil export to China. Shipment volume fell 39.5% to approximately 598.4 million kilograms, compared with nearly 990 million kilograms a year earlier. Export value dropped 40.4% to US$645.6 million, representing a decline of more than US$438 million.
The downturn extended across much of Indonesia’s palm value chain. Exports of processed palm kernel oil declined 25.5% in volume and 29.6% in value, while palm kernel cake also recorded significant losses. Palmitic acid, an important oleochemical feedstock used in industrial manufacturing, experienced the sharpest contraction, with exports plunging nearly 69%.
Palm stearin was the only major product to register growth, although the increase was insufficient to offset losses in olein, which remains the backbone of Indonesia’s palm exports to China.
The figures suggest that while bilateral trade between Indonesia and China continues to expand, the structure of that trade is undergoing a profound transformation.
Indonesia’s aggressive downstream industrialization policy has propelled nickel, steel, and other processed mineral products to the forefront of exports, reflecting China’s growing demand for raw materials essential to electric vehicle batteries, stainless steel production, and advanced manufacturing.
Analysts say several factors may be contributing to the weakening demand for Indonesian refined palm products. China could be importing more crude palm oil for domestic processing, enabling local refiners to capture greater value. At the same time, Indonesia’s newly implemented B50 biodiesel mandate, which took effect on 1 July 2026, is expected to increase domestic consumption of crude palm oil, potentially reducing export flexibility for certain refined products over time.
Competition from alternative vegetable oils, particularly soybean oil, may also be influencing purchasing decisions among Chinese food and industrial manufacturers.
Although Agriculture Minister Andi Amran Sulaiman has maintained that the B50 program will not disrupt Indonesia’s export commitments, market observers say developments in China’s import patterns warrant close attention, particularly if the decline in refined palm products persists through the second half of 2026.
For decades, palm oil stood at the center of Indonesia’s commodity trade with China. The latest data, however, indicate that the relationship is increasingly being defined by critical minerals as global supply chains adapt to the accelerating transition toward clean energy and advanced manufacturing.
If current trends continue, 2026 could mark a pivotal year in the evolution of Indonesia–China trade, with nickel replacing palm oil as the dominant symbol of the two countries’ economic partnership. (AT Network)
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