Malaysia’s CPO exports to China face stiff competition from Indonesia

CPO from Malaysian refineries are more expensive in comparison to oil produced in Indonesia

by ASILA JALIL/ pic by TMR FILE

MALAYSIA’S palm oil exports to the Chinese market is likely to face fierce competition from Indonesia due to their competitive price point and higher crude palm oil (CPO) output.

Kuala Lumpur Kepong Bhd’s business director Ooi Liang Hin said CPO from Malaysian refineries are more expensive in comparison to oil produced in Indonesia that rides on cost advantages due to the nation’s large oil palm plantation and production.

“I do not see a huge drop. The industry is now worried about labour issues post-Covid-19 which might have an impact on harvesting rounds. It is still in the middle of being addressed, but overall, I do not think there will be a significant drop in Malaysia’s production,” he added.

China’s import for Malaysia’s palm oil has, however, shown a declining trend that dropped from 41% in 2016 to 30% last year.

He noted that China’s imports for palm oil will reach six million tonnes this year, in which shares of Malaysian palm oil could constitute between 30% and 40% out of the total import.

“We have to keep in mind that China mainly imports palmolein and they do not import CPO, so a lot of it depends on the structure in Malaysia.

“In the months between January and April this year, Malaysian palm oil shares in China’s import were high because Malaysia had an export duty on CPO and during the same period, Malaysia was unable to export palm oil to India. Therefore, Malaysia’s palm oil was more competitive to China in that respect,” he said in the webinar titled “Palm Oil in the Post Pandemic Market” yesterday.

Malaysia’s total palm oil export from January to May 2020 decreased 23.9% to 6.09 million metric tonnes (MT) compared to eight million MT recorded in the same period last year.

The largest decline was registered in the subcontinent where exports accounted 65.9% to 928,734MT due to sharp decline of exports to India.

A webinar held by the Malaysian Palm Oil Council yesterday revealed that China topped the list as the main export destination with total palm oil exports to the country for the first five months of this year reaching 907,018MT.

It is a marginal increase of 0.84% from 899,429MT registered throughout January until May last year that constituted 14.9% of total exports share.

He added that palm oil output is not expected to see a significant drop despite the pandemic for the whole year in Malaysia.

He also forecast palm oil production in Malaysia to range between 19.2 million tonnes and 19.8 million tonnes in 2020.