The Haze Report 2025 on Palm Oil: Market Trends, Policy Shifts, Biofuel Expansion, and EU Deforestation Regulation

Markets

Trump’s proposed differential tariffs are expected to have minimal disruption in Indonesia's palm oil sector. Analysts, however, are watching for potential indirect effects, such as reduced Chinese purchases of U.S. soybeans, which could shift demand toward palm oil.

Indonesia’s palm oil stands out, supported by:

• Global demand

• Robust downstream industries

• A strong domestic market buoyed by ambitious biofuel mandates (B35, targeting B50)

Despite rising global demand, especially for food and biofuel, Malaysia’s mature oil palm acreage has declined for four consecutive years, while Indonesia’s growth remains marginal. Meanwhile, Brazil’s expanding soybean cultivation has driven high palm oil prices for nine months leading into 2025. Domestic biofuel consumption in Indonesia (B35, aiming for B50) is also drawing down exports, prompting buyers to seek alternative oils and intensifying deforestation elsewhere, notably in Brazil, where forest loss reached 2.82 million hectares in 2024.

On the other hand, calls are growing to revisit Indonesia’s palm oil moratorium. Analysts urge sustainable expansion and urgent replanting with higher-yield seeds, citing aging trees, disease, and underperforming government-linked estates as bottlenecks. While environmental groups often disproportionately target palm oil, they frequently overlook the environmental impact of other commodities like soy and cattle.

Despite being the most efficient oil crop, palm oil continues to face reputational challenges, particularly in the EU, where sustainability concerns and competition from alternative fats and stricter biofuel standards are limiting market access.

Before 2015, commodity price spikes often triggered forest loss in Indonesia through plantation expansion and political cycles. The 2015 fires acted as a wake-up call, and since then, deforestation has moderated despite price fluctuations. In 2024:

• Oil palm expansion slowed slightly

• Peatland conversion dropped

• Overall, deforestation fell 9% compared with 2023.

Forest loss rose modestly in Kalimantan and Sumatra but shifted from illegal to legal clearing within approved concessions. Globally, Indonesia and Malaysia show reduced deforestation, with fire-related losses far below mid-2010s levels, even as major forest loss continues in Brazil, Bolivia, DR Congo, and Peru.

Policies

Under President Jokowi, Indonesia made significant strides in curbing emissions through forest protection and peatland fire prevention. This included a 2021 commitment to achieve a net carbon sink in the forestry and land-use (FOLU) sector by 2030, potentially delivering up to 60% of national emissions reductions. The effort was supported by new carbon pricing and trading regulations and a climate cooperation pact with Singapore. By 2024, Jokowi’s final year, fire rates remained low due to restoration efforts, favorable rainfall, and private-sector action.

Post-Jokowi, concerns have emerged over political support for plantation expansion, threatening climate and haze goals. A recent rise in forest loss in Sumatra and stalled peatland regrowth between 2017–2022 highlight ongoing challenges in sustaining land-based climate gains.

The Prabowo administration’s priorities differ markedly from Jokowi’s.

• While Jokowi implemented palm oil expansion moratoria alongside infrastructure development and mineral downstreaming (with environmental and social costs), Prabowo emphasizes national self-sufficiency in food and energy, viewing carbon markets largely as commercial ventures rather than conservation tools.

• Rising public debt and costly social programs further strain fiscal space.

• State-linked Agrinas aims to control up to one million hectares of contested land, potentially capturing 6–7% of national output. With stagnant palm oil output and limited technological progress, Agrinas’ expansion may strain productivity further.

Nonetheless, Indonesia’s downstreaming strategy seeks to boost value-added processing in palm oil and coconut to support high-income ambitions. Key areas include oleochemicals, food products, and biodiesel expansion (B40 to B50 by 2029). However, rising land-use tensions create a “food vs. fuel vs. export” trilemma. The sector also faces competition from advanced hubs like Malaysia and the EU. Meanwhile, planned estate expansion in Papua faces high development costs and complex local dynamics, raising investor concerns. Amid policy uncertainty and political sensitivities, businesses may become increasingly cautious.

Palm Oil, Biofuels & Industry Transformation

Global demand for palm-based biofuels remains strong, driven by EU and U.S. policies favoring low-carbon fuels. While traditional palm oil faces restrictions, certified waste-derived products such as PFAD and used cooking oil are gaining traction, particularly for aviation and marine fuels. Strict sustainability standards and tight supply make policy clarity essential for future investment.

Indonesia and Malaysia face challenges in balancing domestic needs, subsidy costs, and exports. Indonesia's growing biodiesel demand, stagnant output, and unlicensed mills complicate regulation, while Malaysia focuses on higher-margin exports over domestic biodiesel use.

Indonesia’s palm sector is undergoing a shift, with state-backed Agrinas targeting 1 million hectares of reclaimed land, potentially reshaping industry dynamics. Export competitiveness is at risk amid court scrutiny of major traders and ongoing concerns over governance, land control, and regulatory transparency.

EU Deforestation Regulation (EUDR) and Implications

The EU’s deforestation regulation (EUDR), now delayed to late 2025 for large firms and mid-2026 for smaller ones, aims to eliminate imports linked to deforestation, including palm oil, cocoa, and rubber. Recent revisions ease compliance for large companies by allowing annual due diligence submissions and data reuse, resulting in up to a 30% reduction in administrative costs.

Smallholders, however, remain largely unsupported, and compliance depends heavily on origin-country systems. While Malaysia is advancing digital traceability for smallholders, Indonesia appears to have deprioritized EUDR implementation amid other economic pressures. The EUDR is expected to support haze prevention, but risks excluding smallholders from EU markets without additional support.

The Annual Haze Outlook Report 2025 can be found here.

Reach us at khorreports[at]gmail.com

Indonesia's policy, growth, and political-economic shifts

The robust nature of Forest management policies from Jokowi to the Prabowo Regime

According to the Haze Outlook 2025, the Prabowo administration is set to continue Indonesia’s forest governance by building on the policies established under President Jokowi. Key measures carried over include:

• The establishment of the Peatland Restoration Agency and the continuation of its restoration targets.

• High-profile rulings and prosecutions of companies responsible for fires, setting a precedent for the high cost of non-compliance.

• Jokowi’s commitment to achieving a net carbon sink in the forestry and other land use (FOLU) sector by 2030, along with the issuance of carbon pricing and trading regulations, has opened the door to carbon credit generation through ecosystem conservation and restoration projects.

Under Prabowo, it is hoped that this enforcement remains in fire monitoring and land-use compliance, even as the government shifts economic priorities toward domestic food and fuel production.

The Realities: Rapid Growth and Agricultural Expansion with Environmental Protection

The Prabowo administration has set a target of 8% GDP growth by the end of his first term, part of a broader vision to transition Indonesia into a high-income economy by 2045.

Yet, as the Haze Outlook 2025 notes, this goal presents a difficult balancing act. Indonesia enters this next phase of development with limited fiscal space and relatively high debt levels, even before factoring in the added strain of recent global economic uncertainty. While initiatives such as free school meals may help stimulate domestic consumption and economic growth, they also risk placing additional pressure on public spending.

Palm oil remains central to Indonesia’s economic strategy, contributing 2.5–5% of GDP and supporting 16 million jobs. However, the report warns that “this intensifies the need to manage competing demands: boosting food security, meeting energy needs, and sustaining export revenues, all while avoiding environmental degradation.” 

The Outlook further notes, the administration must ensure that agricultural development moves in step with meaningful environmental protection. Several policy initiatives now underway will serve as critical tests of whether this balance can be maintained.

The future of Indonesia through Agrinas, Papua, and Biofuel mandates, amidst constrained fiscal space, high debt levels

Central to the Prabowo administration's development strategy is Agrinas, a new state-owned enterprise formed through the merger of three companies and backed by the Danantara sovereign wealth fund. The Haze Outlook 2025 notes that Agrinas Palma Nusantara aims to manage up to one million hectares of plantations, potentially accounting for 6–7% of national palm oil output. This reflects a broader push to consolidate land control and accelerate downstream industrialization.

The report also highlights Indonesia’s plan to raise its biodiesel blend from B35 to B40 in early 2025, “consuming palm oil volumes comparable to major export markets like the US and EU.” A B50 target is set for Prabowo’s term, alongside the introduction of E5 bioethanol in gasoline by 2026, policies aimed at bolstering energy security and domestic palm oil demand.

Papua is identified as a strategic frontier for agricultural and energy expansion. However, the report cautions that “high land costs and the need to respect indigenous rights and sustainability” must be taken into account.

Despite these ambitions, fiscal constraints and high public debt limit the government’s capacity to fully fund sustainability efforts. At the same time, the expansion of agriculture, food security programs, and biofuel mandates continues to place pressure on land use and forest governance.

The Outlook underscores the central challenge ahead: balancing economic growth, energy and food security, and environmental protection without undermining fire prevention and emissions reduction targets.

The Annual Haze Outlook Report 2025 can be found here. Part 1 of the analysis of the Haze Outlook report 2025 can be found here.

Reach us at khorreports[at]gmail.com

SCMP Interview: Malaysia pushes for premium palm oil in China as overall imports decline

Segi Enam Advisors principal Khor Yu Leng was cited by South China Morning Post (16 March), for her views on China’s declining demand in importing Malaysian palm oil. Once the top importer of Malaysian palm oil, China has now been ceded by India. According to the Malaysian Palm Oil Board, China imported 1.76 million tonnes of Malaysian palm oil in 2022, representing 11.2% of Malaysia’s exports of the commodity, but that fell to 1.47 million tonnes (9.7%) in 2023 and 1.39 million tonnes (8.2%) last year.

Yu Leng’s comments, as quoted by South China Morning Post, are as below. She opined that Chinese consumers are now after oils perceived to be healthier and referenced the demand for value-added products.

Chinese consumers now have enough money to demand foods made with oils that are considered to be healthier, said Khor Yu Leng, a political economist at Singapore-based Segi Enam Advisors. Much of it can be refined domestically, she added.

Rapeseed oil is common now and may be sourced from China, she said, while much of the vast amounts of soybean China imports each year goes to making oil.

“There is still a middle-income trap for palm oil because there’s a perception that it’s not as healthy,” she said. Specialty, health-focused palm oil is a “niche” industry now, she added, but it is morphing into a new norm.

“There’s been talk that there’s more demand for value-added products,” Khor said. “Everyone’s trying to produce some now.”

…

To help shore up the industry, Malaysia secured more than RM230 million (US$51.8 million) worth of palm oil trade deals in July when the country’s deputy plantation and commodities minister, Chan Foong Hin, visited China.

They included an e-commerce deal to help sell palm oil as health products in China, Bernama, Malaysia’s national news agency, reported, while another deal targeted the expansion of vitamin-rich red palm oil use in Chinese animal feed.

Another aimed to expand Malaysian refinery Able Perfect’s Chinese “presence” in refined palm oil and palm shortening to about RM200 million, Bernama quoted the deputy minister saying.

“This looks better than past MOUs, since [it’s] apparently specific on new and value-added products,” Khor said.

Reach us at khorreports[at]gmail.com

SCMP Interview: Indonesia’s triumph over palm oil ‘win’ over EU before the WTO but demand and market access issues could sour hopes

Segi Enam Advisors principal Khor Yu Leng was cited by South China Morning Post (25 Jan), for her views on Indonesia’s palm-oil biofuel ambitions following the WTO’s decision. The decision, issued on 10 January 2025, ultimately upheld the EU’s ability to take environmental and climate-based action under its Renewable Energy Directive and affirmed the EU’s classification of palm-oil based biofuel as ‘high risk’ due to its links with deforestation. Notwithstanding, the organisation also criticised the EU’s procedures for lacking transparency and for insufficiently reviewing data to justify its ‘high risk’ designation, rendering them inconsistent with WTO rules. Indonesia, the world’s leading palm oil producer, has since framed the WTO’s criticism of the bloc’s procedures as a “win” in its ongoing battle against EU restrictions on its palm-oil biofuel ambitions. The EU has since stated that it will ‘take the necessary steps to respect its WTO obligations’. 

Yu Leng’s comments, as quoted by South China Morning Post, are as below. She referenced Malaysia’s 2021 dispute, in which Malaysia brought a WTO claim against the EU over the latter’s classification of palm oil and palm crop-based biofuels as being at ‘high risk’ of indirect land-use change and argued the measures were discriminatory. In 2024, the WTO upheld the measures taken by the EU, as well as affirming certain related French measures. 

Khor Yu Leng, a political economist at Singapore-based Segi Enam Advisors, noted that the ruling echoed Malaysia’s earlier dispute with the EU. “The EU broad policy was upheld, again, but its procedures were faulted,” she said, describing it as “deja vu”....

… Indonesia and Malaysia together produce more than 85 per cent of the world’s palm oil and have been at the forefront of the push for palm oil-based biofuel. Both have sought to leverage their palm oil reserves as a renewable energy source by blending the commodity with ordinary fossil-fuel diesel.

But palm oil biofuel faces an uphill battle. Despite ambitious targets – Indonesia plans to increase its biodiesel blend to 40 per cent this year and up to 50 per cent by 2029 – the global market for palm oil-based biodiesel remains thin, Khor said.

“For a thinly traded palm product, there has been a surprising amount of ink and political capital spent on it,” she said, noting that even neighbouring Southeast Asian countries are prioritising electrification over biodiesel.

“Despite giddy hopes over 10 years ago, there’s just not much trade in this product. Both Malaysia and Indonesia cannot even get neighbouring countries to provide policy support for this.”

Palmtrack: UCO & tallow in the world of palm oil

Editor's Note: this article first appeared on PalmTrack, 17 December 2024. Subscribe to PalmTrack here to get the latest posts!

UCO (used cooking oil) and tallow (rendered animal fat) are two key materials used to produce biofuels like biodiesel and renewable diesel. They both come from waste products, making them sustainable alternatives to conventional feedstocks. From our May 2024 review on Singapore, you can see details from our findings, in the chart below.

UCO is simply waste oil left over from cooking and frying food. Think of the used oil from restaurants or even your kitchen—it’s collected and repurposed instead of being thrown away. In Southeast Asia and beyond palm cooking oil is a major source of UCO. The global palm oil consumption is around 75–80 million tons per year recently, with a significant portion used in cooking. If 20–30% of this were converted into UCO, it could yield 15–24 million tons of UCO annually? But there’s many reasons why the volume is not that high (read about context and issues below).

Indonesia, Malaysia and Singapore are key countries in the trade and processing of palm oil. How does UCO and tallow feature in their trade? Let’s check out the import and export statistics.

Our key findings:

• About 400k tonnes of degras from Indonesia, from domestic sources. Imports are low to negligible.

• Over 1 million tonnes of UCO plus tallow from Malaysia, as a transhipment hub,

  backed by about the same amount of imports, that is up until 2021. The divergence of UCO exports (uptrend) and UCO imports (collapse) in 2022 and 2023 is surprising? The gap of exports and imports is surely not from domestic sources. This needs much explanation. (We’ll have to ask around!)

• Singapore has been sucking in about 1.7 million tonnes annually, of UCO and tallow recently! The renewable diesel/SAF plant of Neste in Singapore has a capacity of over 2 million tonnes. We would love to report on the exports of these products, but even the EU has problems tracking this. (Quantum reported, Oct 2024: The EU is expected to introduce an HS code for sustainable aviation fuel (SAF) in the near future. The purpose of this code is to increase the visibility of trade flows and address concerns that SAF could be used to avoid anti-dumping duties on Chinese HVO.)

Malaysia. The 20-year trend for Malaysia's exports of UCO, degras, and tallow indicates that this segment emerged in the early 2000s, albeit with low export volumes. Exports experienced slight spikes in 2006 and 2013, followed by a strong upward trajectory starting in 2015. Malaysia's imports of UCO, degras, and tallow have mostly matched exports, highlighting its role for transshipment. However, Malaysian imports of UCO diverged from this trend, showing a significant upward climb from 2017 onwards, peaking at approximately 690,000 tons in 2021, then declining substantially. This drop is surprising as Malaysia has a relatively low supply of domestic UCO. What's going on? Is another HS code in play for these imports?

Indonesia. In general, imports are minimal and remain consistently so throughout a twenty-year period. Indonesia is an exporter of domestic waste oils. The trend for exports of UCO, degras, and tallow in the early 2000s was low. UCO exports had a sharp rise 2006 to 2008, followed by modest growth until 2015 when a strong upward trajectory emerged with a peak in 2021 followed by 200,000 tonnes exports annually most recently. Degras exports showed low-steady activity before surging in 2023. Might this reach 200kt a year?

Singapore. Export volumes have remained low overall, with some uptick between 2007-2009 and 2011-2013 which seem to be matched by imports, but less so for tallow. Since 2015, UCO imports have really surged, reaching over 1.2 million tonnes a year in 2023. Tallow imports spiked 2016-2019, stabilising around 500,000 tonnes annually since 2020 with a slight downward trend. Refer to our notes on Neste, which is a major processor of these raw materials into value-added products - renewable diesel and SAF, and our graphic at the top of this article.

Context and issues

Why use UCO in biofuels? It’s sustainable. UCO doesn’t compete with food crops since it’s essentially a waste product. It’s cost-effective. Repurposing UCO is cheaper than producing virgin oils. It’s good for the environment. Recycling it reduces landfill waste and lowers greenhouse gas emissions. UCO is processed through methods like transesterification (to make biodiesel) or hydroprocessing (to create renewable diesel). These biofuels can then power vehicles as eco-friendly alternatives to fossil fuels.

Tallow comes from rendered animal fat, a byproduct of the meat industry. It’s mostly derived from beef or mutton fat, but other animal fats can be used too. Tallow is valuable in biofuels as it reduces waste. Tallow turns animal byproducts into something useful. It’s energy-rich. Packed with lipids, tallow is highly efficient for biofuel production. It supports a circular economy. It’s a great way to reuse materials that would otherwise be discarded. Similar to UCO, tallow is transformed into biodiesel or renewable diesel using advanced chemical processes.

Q: How do UCO and tallow compare to other feedstocks?
A, Both have a lower carbon intensity than conventional feedstocks like palm oil or soybean oil, making them more environmentally friendly. Plus, governments often incentivize their use through renewable energy policies and standards.

Q: Are there challenges?
A. Definitely! These include:

• Limited supply: Collecting UCO efficiently can be tricky, and the supply depends on how much waste is generated.

• High demand: As more industries rely on UCO and tallow, competition for these resources is growing.

• Processing hurdles: Both require proper filtering and treatment to remove impurities before they’re converted into biofuels.

Bottom line: UCO and tallow are game-changers for sustainable energy. They reduce waste, lower emissions, and contribute to global renewable energy goals. Plus, everyone is keen on their role in the circular economy.

UCO is a great option for sustainable biofuels, but it comes with its share of controversies. These include: 

• Fraud: Some UCO gets reused in food (like “gutter oil”), which is unsafe. There’s also fraud, where virgin oil is mixed in to claim subsidies.

• Traceability: It’s hard to confirm UCO is genuinely waste, especially in global supply chains. Exporting UCO can also deprive local communities of a valuable resource.

• Environment: Collecting and shipping UCO has a carbon footprint, and some fear rising demand might lead to creating waste oil intentionally.

• Economics: UCO has other uses, like making soap or animal feed. Prioritizing biofuels could disrupt these markets or raise costs.

• Greenwashing: UCO is limited, and critics worry its “sustainability” is exaggerated, shifting focus from reducing fossil fuel use.

Key controversies: (i) China's Gutter Oil Scandal: Reports of UCO being repurposed for human consumption have highlighted safety risks and the need for stricter regulations. (ii) EU Imports: The European Union’s heavy reliance on UCO imports for biofuels has faced criticism for its environmental costs and the potential for fraud in tracing the source of UCO.

Tallow has its own controversies. These include:

• Ethics. Animal Welfare: Since tallow is derived from animal fat, its use raises ethical concerns for vegans and those opposing industrial livestock practices.Dependence on Meat Industry: Critics argue that relying on tallow for biofuels indirectly supports large-scale meat production, which has significant environmental and ethical issues.

• Environment. Deforestation Links: Increased demand for meat (and thus tallow) may contribute to deforestation for grazing land. Carbon Emissions: Although tallow-based biofuels have a smaller carbon footprint than fossil fuels, livestock farming produces significant methane emissions, offsetting some of the benefits.

• Economics and supply. Competing Uses: Tallow is also used in products like soap, cosmetics, and animal feed. Diverting it to biofuels could drive up costs for these industries. Limited Availability: As a byproduct of meat processing, tallow supply is finite and cannot scale easily to meet growing biofuel demand.

• Culture. Religious and Dietary Restrictions: In some cultures, the use of animal-derived products, including tallow, is controversial or unacceptable.

The Trouble with Tallow (and Renewable Diesel?): Singapore & Globally

By Khor Yu Leng, yuleng@segi-enam.com & Claudia Nyon research@segi-enam.com 

Industry players have been agog at news from Argus reporting a pile up of tallow vessels outside Singapore shortly after production stoppage at Neste’s Singapore biorefinery slowed down purchases of tallow feedstock. Equipment failure around mid-October at the refinery put the production of renewable diesel to a standstill, as covered by us here. 

Three vessels have been pinpointed as carrying tallow and facing trouble offloading the commodity in Singapore: Stolt Renge, Stolt Sakura and Stolt Satsuki.  

We’ve tracked these vessels and our findings confirm this.

The Stolt Renge, which has a carrying capacity of 12,343 tonnes sailing under the flag of Singapore, has a current load condition of being in ballast (i.e., not carrying any cargo but containers filled with sea water to add weight). It departed from Port Klang and arrived in Singapore on 6 November, 9.15 a.m. Since late October, the Stolt Renge seems to have been shuttlingbetween Port Klang and Singapore. In early October, the Stolt Renge stationed itself in Singapore for 21 days. 

Another such ship similarly found itself stationed in Singapore for long periods of time in early October: the Stolt Sakura was stationed for 23 days before heading to Port Klang where it moved between the different anchorages within Port Klang for the next 12 days. As last checked, the Stolt Sakura is now stationed in Kuantan with a load condition of being in ballast. It has a carrying capacity of 12,817 tonnes sailing under the flag of Singapore.

Unlike the earlier ships, the Stolt Satsuki has found herself stationed in Singapore since 21 October since its arrival from Brisbane. It has a load condition of being laden with a carrying capacity of 12,342 tonnes sailing under the flag of Singapore.

The collective dates indicating inactivity in Singapore since early October coincides with reports in early October that Neste’s Singapore diesel line was taken offline after equipment failure following scheduled maintenance work. In early November, Neste reportedly also temporarily shut down its refinery in Rotterdam, Netherlands, following a fire. Neste subsequently lowered its full-year guidance for renewable products sales volumes. These delays reflect a broader supply chain issues.

Demand-side, soaring US biofuel demand is reshaping trade flows. In early November (as reported prior to the US election) significantly changed global trade flows of tallow in the past two years, boosting world trade to a new high of 2.5 Mn T in Oct/Sept 2023/24 (+24%). 

The story on tallow, as one of several diesel feedstocks, is just one facet of the broader narrative surrounding renewable diesel’s future. In the first four months of 2024, imported Brazilian tallow in the US for biofuel production surged by 377% compared to previous years, edging out US soybean farmers. From Jan to Sept 2024, reports came in that the US flooded its market with a record 3.9 billion pounds of imported UCO, up 98% year-on-year, 55% of which originated from China. 

Some experts suggest the volume of UCO imported by the US in 2024 was enough to replace the oil from more than 332 million bushels of soybeans (equivalent to Minnesota’s entire 2024 crop).Others counter that the demand for soy oil has consistently increased since food use has remained steady  since the mid-2000s after the FDA set rules on trans fat use in foods. They argue that imports are necessary to meet domestic demands for biomass-based diesel, be it feedstocks or finished products. 

Renewable diesel made from tallow and UCO has a lower carbon score than soybean oil and hence was eligible for higher tax credits in California, where a high proportion of US green diesel is consumed. 

However, with president-elect Donald Trump’s unannounced tariff plans, it remains possible that a blanket import tariff could close the door on imported (and cheaper) renewable diesel supplies. 

Coupled with Neste’s refinery disruptions, perhaps renewable biofuels in general are at risk? The Trump administration’s pick for the EPA administrator, Lee Zeldin, has already resulted in the biggest slump in soybean oil  since July 2024, as noticed by experts a few days ago. Experts typically zoom in on soybean oil as it tends to react first to any headlines related to the RFS. Historically, Lee Zeldin has consistently voted against the Renewable Fuel Standard (RFS) and soybean oil has been one of the main feedstocks used in biofuel production.