Malaysia 2024 palm oil exports to grow 3.3% but global risks remain

SINGAPORE (ICIS)–Malaysia’s palm oil exports are expected to improve this year amid better demand from key export destinations, but face risks from trade policy shifts and geopolitical tensions, industry officials said on Tuesday.

Palm oil exports are projected to grow by 3.3% year on year to 15.6m tonnes in 2024, while the export value of palm oil and palm-based product is expected to increase by 4.3% to Malaysian ringgit (M$) 110bn, Abdul Wahid Omar told delegates at the 35th Palm & Lauric Oils Price Outlook Conference & Exhibition (POC2024) in Kuala Lumpur.

Malaysia is the world’s second-biggest producer of palm oil, after Indonesia.

Despite the positive outlook for the palm oil industry, market participants need to stay alert to potential challenges, he said.

“These may come in the form of the increasingly unpredictable weather conditions, potential shifts to global trade and ESG [environmental, social, and governance] policies, and ongoing geopolitical risks, all of which could significantly impact palm oil trade,” Abdul Wahid said.

Malaysia’s minister of plantation and commodities Johari Abdul Ghani in a speech at the conference said that demand from export destinations such as India, China and the EU is set for robust growth this year.

“The demand is further supported by the interest in replenishing stocks to ensure food security and the overall viability of business activities,” the minister said.

Despite global market challenges in 2023, Malaysia’s palm oil industry remains a vital economic growth driver, Bursa Malaysia’s Abdul Wahid said.

Notwithstanding the challenging operating environment from domestic and global fronts, Malaysia’s agriculture sector posted a 1.9% GDP growth in the fourth quarter of 2023, compared with 0.9% in the previous quarter, according to Abdul Wahid.

“This growth was largely driven by the oil palm sub-sector, which increased by 1.6% owing to higher production of fresh fruit bunches,” he said.

Ample supply of fresh fruit bunches drove palm oil prices to normalise to an average of M$3,890.50/tonne in 2023, after hitting a record high of M$5,087.50/tonne in 2022.

PALM OIL EXPORTS TO UK SET TO RISE
The UK’s entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) last year will also benefit Malaysia’s palm oil industry, CME Group managing director and Asia-Pacific head Russell Beattie told delegates at the conference.

The CPTPP is an Asia-Pacific trade bloc made up of 11 countries: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Malaysia’s successful bid to get the UK to cut its palm oil tariffs from the current rate of up to 12% to nil upon entering the pact, will drive exports to the UK, Beattie said.

“This is also expected to open the door for industry players to capitalize on opportunities arising from expanded market access and increased exports to the UK and the other CPTPP member countries,” he said.

Malaysia’s palm oil production in 2024 is estimated to rise to 18.8m tonnes, up 1.1% from last year, Beattie said.

“On the other hand, other developments such as Indonesia’s domestic biodiesel mandate could lead to a further strain on global palm oil inventories, and lead to a scenario where prices are supported in 2024, due to limited exports from Indonesia,” he said.

Focus article by Nurluqman Suratman

Additional reporting by Helen Yan

($1 = M$4.73)