A likely tightening of palm oil supply driven by Indonesia’s higher biodiesel mandate is expected to support continued growth in longhaul soybean oil shipments from the Americas to Asia in 2026, thereby boosting tonne-mile demand for large chemical tankers.

However, the ongoing US–India trade negotiations pose a downside risk. If India allows imports of genetically modified (GM) soybeans from the US, the former’s reliance on imported vegoils will reduce, potentially curbing longhaul vegoil flows which will in turn weigh on chemical tanker demand.

While palm oil has long dominated the global vegoil market due to its high yield and price advantage over competing oils, a sharp rise in its price in 2024, driven by tightening supplies, erased its usual discount to soybean oil. The global supply squeeze has been building over the past two years, largely because of Indonesia’s escalating biodiesel blending mandates. The country, which is the largest exporter of palm oil, raised its mandate from B30 in 2023 to B35 in 2024 and B40 in 2025, pushing up the domestic palm oil consumption for biodiesel from 11.9 million tonnes in 2023 to an estimated 13.6 million tonnes in 2025.

As domestic palm oil demand surged under Indonesia’s higher biodiesel mandates, the country’s palm oil exports dropped 17%, from 26.1 million tonnes in 2023 to 21.6 million tonnes in 2024. Although exports have edged up 0.8% in the first 10 months of 2025 compared with the same period a year ago, they remain well below 2023 levels. This sharp contraction in shipments from the world’s largest exporter has tightened global palm oil availability over the past two years, supporting elevated prices and prompting price-sensitive buyers such as India to shift towards soybean oil.

The average CIF price of soybean oil in India, which had typically carried a premium of about $150 per tonne over palm oil during 2019–23, fell below palm oil prices in 2024 as palm oil supplies tightened. In 2025, persistent supply constraints kept palm oil prices on par with soybean oil. As a result, soybean oil has gained a larger share of India’s vegoil imports at the expense of palm oil since 2023. This shift towards longhaul soybean oil shipments from Latin America instead of shorthaul palm oil cargoes from Southeast Asia has boosted the tonne-mile demand for MR chemical tankers.

With Indonesia set to raise its biodiesel mandate to B50 in June 2026, an additional 1.7 million tonnes of palm oil is expected to be diverted into the country’s biodiesel pool. Since the country’s palm oil production has largely plateaued, this increase in domestic consumption will further compress export availability in 2026, increasing India’s reliance on soybean oil imports from the Americas, assuming production in the Americas remains stable. As voyages from Latin America to India are roughly four times those from Indonesia, any increase in soybean oil inflows will substantially boost the tonne-mile demand for MR tankers.

However, if soybean oil supply fails to fully offset the shortfall created by reduced palm oil availability, the global vegoil market could tighten significantly, particularly at a time when sunflower oil supplies are already constrained by lower output in Russia and Europe. Any resulting contraction in global vegoil trade would weigh on MR tanker demand.

In addition, the ongoing US–India trade negotiations pose another risk to longhaul vegoil flows. Although India has so far resisted imports of genetically modified soybeans from the US, a change in the former’s stance could trigger a surge in US soybean shipments. Increased domestic crushing as a result would reduce India’s dependence on imported vegoils, potentially curbing longhaul vegoil imports and softening tonne-mile demand for chemical tankers.
Source: Drewry