Indonesia's planned implementation of a B50 biodiesel mandate is expected to significantly influence vegetable oil freight rates, maintaining upward pressure on costs through 2027. This development follows a period in April 2026 when vegoil freight rates on major trade routes reached unprecedented highs. These peaks were attributed to supply chain disruptions stemming from the US-Iran conflict.
While rates have since receded from their record levels, aligning with a general decline in product tanker earnings due to reduced demand, they still sit above the pricing observed before the conflict. The introduction of the B50 mandate, which requires a higher blend of palm oil in biodiesel, is set to increase domestic consumption of palm oil within Indonesia. This will likely reduce the volume of palm oil available for export, thereby tightening the supply of vegoil cargoes for international shipping.
For freight forwarders and operations managers, this mandate implies potentially higher costs for shipping vegetable oils, particularly palm oil, out of Indonesia. Capacity for vegoil tankers might become tighter, and securing space could require earlier bookings or accepting increased spot rates. Shippers of vegetable oils should anticipate sustained elevated freight costs and factor this into their logistics planning and budgeting for the next few years. The shift in trade flows and increased domestic demand could also lead to longer lead times for securing vessel space.
