Indonesian rice field growth to lift fertilizer demand

Market: Fertilizers
24/10/24

Indonesia's government plans to launch a program to develop around 3mn hectares (ha) of new rice fields from next year, which will likely lift domestic fertilizer demand in 2025.

The first phase would involve developing around 1mn ha of paddy in Merauke, West Papua. This is expected to create local demand of around 500,000 t/yr for urea and NPK fertilizers, according to a source at state-controlled fertilizer group Pupuk Indonesia. President Prabowo Subianto supports this paddy expansion program to bolster Indonesia's national food security. The expansion plan also includes increasing the number of harvests from one harvest each year to around 2-3 harvests annually.

Pupuk Indonesia is building a 1mn t/yr granular urea plant in Fakfak Regency, West Papua, which is expected to be completed in 2028, targeted to cater to potential growth in demand from expansions in rice planting areas. The group is also building a 400,000 t/yr prilled urea plant Pusri 3B in Palembang to replace its older prilled urea units. The plant is expected to come on line in 2025.

Pupuk Indonesia is required to continue producing large volumes of subsidised fertilizers for the domestic industry. The government allocates approximately 25 trillion rupiah/yr ($1.6bn/yr) to aid farmers in obtaining affordable fertilizers, according to Pupuk Indonesia. The government increased the fertilizer subsidy allocation by around 14 trillion rupiahs this year to benefit more farmers. Pupuk Indonesia will distribute around 9.55mn t of subsidised fertilizer allocation in 2024, with around 4.63mnt consisting of urea fertilizers, 4.42mn t of NPK fertilizer including special formula NPKs, and 500,000t of organic fertilizers. Subsidised fertilizer allocations have also increased across all regions, with West Java receiving 1.21mn t, Central Java 1.51mn t, East Java at 1.92mn t, South Sulawesi 798,200t, and Lampung at 803,700t.

Pupuk Indonesia currently has a fertilizer production capacity of over 14.6mn t/yr. The increase in domestic demand for fertilizers like urea and NPK could potentially result in fewer exports from Indonesia in 2025, as more production is prioritised for the domestic markets.

By Dinise Chng

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