Can India and China save Malaysia’s palm oil sector?

Global exports of palm oil rose to 12.6m tonnes during the January-August 2019 period


INDIA and China have salvaged Malaysia’s struggling palm oil sector, importing about five million tonnes of the commodity during the January-August 2019 period despite rising worries of future bans of the commodity in Europe.

Global exports of Malaysia’s second-largest commodity rose to 12.6 million tonnes during the January-August 2019 period from 10.53 million tonnes a year ago as planters struggled with rising stocks and plateauing prices, according to official figures from Malaysia Palm Oil Board (MPOB).

China’s imports of palm oil rose to 1.4 million tonnes from the January through August 2019 period compared to 1.08 million in the corresponding period a year ago. The import from the world’s most populous nation is almost identical to the imports of the European Union (EU).

At this rate, China is likely to displace the EU as Malaysia’s second-largest importer of palm oil.

India, Malaysia’s largest export market, more than doubled its imports during the same period to 3.6 million tonnes from 1.66 million tonnes a year ago.

Iran also registered healthy rise of palm oil imports to 368,656 tonnes from 255,330 tonnes.

Despite the negative sentiments in Europe, EU countries’ imports of palm oil rose by 145,000 tonnes in the January through August period this year.

Official figures showed exports of palm oil to the EU for the first eight months of this year rose to 1.42 million tonnes from 1.27 million tonnes in the same corresponding period of 2018. The EU is the second-largest market for Malaysia’s key commodity.

Palm oil, which is used in various consumer food retail to personal care and cosmetics, has been under scrutiny by Europe for claims of deforestations and destruction of flora and fauna. But the rise in export, however, had not pushed prices and local planters are struggling to stay profitable.

Palm oil imports from EU countries like Spain, Belgium, Germany, Hungary, Italy, Latvia, Romania and Poland rose during the first eight months of the year.

Italy’s palm oil imports from Malaysia rose to 305,815 tonnes from 202,115 tonnes, while Romania’s purchase of the commodity jumped to 8,362 tonnes from 6,346 tonnes and Germany to 16,018 tonnes from 13,466 tonnes.

The widespread objection to palm oil in Europe could have influenced a few countries. The UK, Greece, Estonia, Bulgaria and Denmark registered lower imports of the commodity during the period under review, according to the statistics.

Last year, the EU’s palm oil usage stood at 7.6 million tonnes of which 25% or 1.9 million tonnes, were imported from Malaysia. The biofuels usage for the transportation sector accounted for 65% of its palm oil consumption.

Palm oil exports to the EU countries have been sliding in the span of six years. The EU has labelled palm oil as not green for renewable energy which may see the commodity phased out in the next few years.

The exports to the Netherlands, which is the biggest export market for Malaysia among the EU countries, fell below one million tonnes last year.

The MPOB data shows that 27 of the EU country members were importing palm oil from Malaysia in 2013 compared to 22 countries last year.

Spain is an exception as the Spanish government declared its opposing views compared to the EU’s palm oil policy.

Previously, analysts have commented that the EU’s options to increase the usage of renewable sources alternatives such as rapeseed and soybean oils are not sustainable for the long term as the cultivation of the soft oils requires more land.