PALM OIL MARKET Prepared by Malaysian Palm Oil

PALM OIL MARKET Prepared by Malaysian Palm Oil Board (MPOB) Ministry of Plantation Industries and Commodities www. mpob. gov. my

PALM OIL MARKETS Ministry of Plantation Industries and Commodities www. mpob. gov. my

MALAYSIA: MAJOR EXPORT PRODUCTS, 2019 RANKING: 1. Electrical & Electronic Products 2. Petroleum Products 3. Chemical & Chemical Products 4. LNG 5. Manufactures of Metal 6. Machinery, Equipment & Parts 7. Optical & Scientific Equipment 8. PALM OIL Source: MATRADE 2019 Ministry of Plantation Industries and Commodities www. mpob. gov. my

EXPORT VALUE OF PALM OIL AND PALM-BASED PRODUCTS (RM BILLION), 2019 TOTAL: RM 64. 84 Billion OTHER PALM BASED PALM KERNEL CAKE, PRODUCTS, 3. 95, 6% 1. 01, 2% PALMBIODIESEL, KERNEL OIL, 1. 62, 2% 3. 31, 5% PALM- BASED OLEOCHEMICALS, 16. 93, 26% PALM OIL, 38. 03, 59% Source: DOSM Ministry of Plantation Industries and Commodities www. mpob. gov. my

EXPORT VALUE & MARKET SHARE OF MAJOR PALM OIL IMPORTING COUNTRY (RM MILLION), 2019 INDIA; 8, 209; 22% OTHERS; 10, 719; 28% TOTAL : RM 38, 027. 4 Million CHINA; 4, 983; 13% USA; 1, 103; 3% JAPAN; 1, 139; 3% IRAN; 1, 150; 3% VIET NAM; 1, 221; 3% Source: DOSM PHILIPPINES; 1, 401; 4% TURKEY; 1, 588; 4% Ministry of Plantation Industries and Commodities EU 28; 4, 592; 12% PAKISTAN; 1, 921; 5% www. mpob. gov. my

FACTORS AFFECTING PALM OIL MARKET Ministry of Plantation Industries and Commodities www. mpob. gov. my

1. Discriminatory Import Duty on Palm Oil Vis-à-vis Soft Oils & Oilseeds § India: Relationship between PO import duty vis-à-vis CBO/SFO and PO Imports PO import duty v PO Imports (‘ 000 T) In India, current Most Favoured Nation (MFN) import duties on PO products higher than other major vegetable oils - 44% CPO & 54% RPO Vs 35% CSBO/CSFO & 45% PSBO/PSFO and Oilseeds: 30 -45%. Reduction on PO imports duty via FTA arrangements (ie. , M’sia-India bilateral FTA & ASEAN-India FTA) vis-à-vis CSBO/SFO resulted in higher palm oil exports to the country in 2019. 12, 000 10, 000 8, 000 6, 000 4, 000 2, 000 0 10% 8% 6% 4% 2% 0% -2% -4% -6% 16 § M’sian PO exports not only compete with other soft oils (SBO, SFO, RSO etc) but also with oilseeds (soyabean, rapeseed, etc). Discriminatory import duties plus their prices determine the type of veg. oils to be imported. 20 § PO Imports PPO Vs. PSBO/PSFO Ministry of Plantation Industries and Commodities www. mpob. gov. my CPO Vs. CSBO/CSFO

Cont… 1. Discriminatory Import Duty on Palm Oil Vis-à-vis Soft Oils & Oilseeds § The higher MFN import duties imposed by India on PO products is aimed at: Ø To protect the interest of Indian oilseeds farmers and to encourage oilseeds plantings. Ø To curb ‘cheaper’ imports of vegetable oils that compete with domestically produced vegetable oils. Ø To encourage the “Make in India” initiative as well as value-addition to be undertaken within India. Ministry of Plantation Industries and Commodities www. mpob. gov. my

Cont… 1. Discriminatory Import Duty on Palm Oil Vis-à-vis Soft Oils & Oilseeds § On 1 st Jan 2019, exports of M’sian PO under MICECA enjoyed lower import duty (CPO 40% & refined PO 45%). § Malaysia regained market share in 2019 because import duty advantage Vs Indonesia & other ASEAN nations under ASEAN–India FTA arrangement (AIFTA). Under AIFTA, import duty on CPO 40% & refined PO 50%. In 2019, M’sian PO market share: 41% & Indonesia: 50%. § Effective 1 st Jan 2020, import duty under MICECA & AIFTA are on a level playing field (CPO 37. 5% & refined PO 45%). § Though the current preferential import duties for PO under FTAs are almost at the same level with MFN, PO is still the major oil imported because of its price competitiveness. Ministry of Plantation Industries and Commodities India’s Commitment under Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) Description CPO RBD palm oil RBD palm olein Other CPKO Palm kernel oil & fractions 1 Jan 2017 1 Jan 2018 31 Dec 2018 1 Jan 2019 48% 58% 58% 44% 54% 52% 44% 45% 45% 40% 45% 45% 31 Dec 2019 onwards 37. 5% 45% 45% 58% 52% 45% 45% Msian & Indonesian Share of PO Imported by India Year 2015 2016 2017 2018 2019 www. mpob. gov. my Malaysia Volume % Share of Imported Total Indian (Tonnes) PO Imports 3, 725, 000 39. 2 2, 990, 200 36. 0 2, 091, 900 22. 5 2, 191, 200 24. 1 4, 125, 000 41. 1 Indonesia Volume % Share of Imported Total Indian (Tonnes) PO Imports 5, 770, 600 60. 8 5, 312, 900 64. 0 7, 053, 500 75. 9 6, 158, 900 67. 8 5, 046, 500 50. 3

Cont… 1. Discriminatory Import Duty on Palm Oil Vis-à-vis Soft Oils & Oilseeds § In Bangladesh: Ø Discriminatory import duty btw PO & soft oils - which could lead to lower PO imports at the expense of other veg. oil & oilseeds (at 0% duty). Ø Imports 1. 0 -1. 2 Mn. T of soyabean annually for crushing purposes (for meal & oil) due to 0% duty. Imports of veg. oil depend not only on import duty but also price competitiveness of veg oil & the availability of veg. oil from crushing activity. Bangladesh: Import Duty on Selected Oilseeds & Veg. Oilseeds (Soyabean, Sunflowerseed & Rapeseed): 0% Veg. Oils PO SBO SFO RSO Crude Veg oil 10% 0% 5% 10% Processed Veg oil 0 -25% 0 -5% 10% 25% Ø Imported 1. 2 -1. 6 Mn. T of PO compare to 0. 80. 9 Mn. T of SBO annually depending on the availability of domestic veg oil. Ministry of Plantation Industries and Commodities www. mpob. gov. my

2. Competition With Other Vegetable Oils § World soyabean import demand is stronger due to an upward trend in domestic crushing for soyabean meal & SBO. § However, in 2019, trade war between USA & China worked in favour of PO. M’sian PO export to China increased by 33. 9% to 2. 49 Mn T (2019) from 1. 86 Mn T (2018) due to less soyabean import by the country. § Price competitiveness, i. e. CPO traded lower by USD 32/T to USD 566/T in 2019 Vs USD 598/T in 2018, with discount of USD 190/T as against SBO price. Ministry of Plantation Industries and Commodities www. mpob. gov. my

Cont… 2. Competition With Other Vegetable Oils § Price competitiveness of PO plays a significant role in determining its imports. § Import share of PO over total imports of oils & fats increases when the price discount of PO over major veg. oils decreases. Relationship between PO Price Discount and Palm Oil Import Share (%) 70 65 60 55 50 45 40 500 400 300 200 100 0 2015 India Ministry of Plantation Industries and Commodities 2016 EU 2017 China 2018 2019 Price Discount of CPO V. SBO www. mpob. gov. my PO Price Discount over S

3. Price Competition With Crude Oil For Biodiesel In a market like the EU where PO is mainly used for biodiesel production, price competitiveness of PO against crude oil is a key for PO imports. § In a normal scenario, when PO premium over crude oil decline, imports of PO for biodiesel will increase, vice versa. Relationship between CPO premium over Brent crude oil and EUT) palm oil imports EU PO Imports (Mn CPO Premium 7. 4 7. 3 7. 2 7. 1 7 6. 9 6. 8 6. 7 6. 6 6. 5 6. 4 500 400 300 200 100 0 (100) (200) 2013 § Ministry of Plantation Industries and Commodities www. mpob. gov. my EU PO imports CPO Premium over Brent

4. Negative Campaigns Against Palm Oil § Trade protectionism towards PO by Western countries is in the form of anti-PO campaigns & regulations instituted to refrain imports of PO. § Regulation such as the EU’s Delegated Act for REDII isolates PO as the only feedstock crop that presenting a high risk of ILUC compare to other veg. oils. § Higher imports & usage of PO are viewed as replacing or threatening domestic vegetable oils in importing countries. § This has caused serious concerns among edible oil producers & NGOs, thus initiating the anti-PO campaigns in the EU. Ministry of Plantation Industries and Commodities www. mpob. gov. my

Cont… 4. Negative Campaigns Against Palm Oil § § Mainly on 3 areas, i. e, Environmental Impact, People’s Health & Social Impact. § PO is also blamed for increase of Non-Communicable Disease (NCD) & cardiovascular disease. Especially in Europe where PO is linked to deforestation, loss of biodiversity as well as misleading labelling such as “No Palm Oil” and “Palm Oil Free” label. Environmental Impact • Deforestation • Loss of biodiversity • Greenhouse Gases (GHG) emissions Ministry of Plantation Industries and Commodities People’s Health • Saturated Fat • Food Safety – 3 MCPDE & GE www. mpob. gov. my Social Impact • Forced and Child Labour • Misleading labelling

5. Increasing Palm Oil Competition From Indonesia § Indonesian PO is being a preferred choice, purely based on price consideration – eroding Malaysian PO market share. § Price undercutting by Indonesian exporters is driven by the differentiated duty structure for CPO & PPO. § Price undercutting will only result in both Malaysia and Indonesia losing out. Ø In 2018, Indonesian CPO at a discount of Ø USD 2. 65/T over M’sian CPO. Ø However, in 2019, M’sian CPO at a discount of Ø USD 12. 57/T over Indonesian PO. Ministry of Plantation Industries and Commodities www. mpob. gov. my

MEASURES TO STRENGTHEN PALM OIL MARKET Ministry of Plantation Industries and Commodities www. mpob. gov. my

1. Signing of Free Trade Agreements (FTAs) • Currently, Malaysia implemented 14 FTAs, either bilaterally or regionally via ASEAN. • FTA offers lower or zero tariff on exports & import - Malaysian PO products will gain better market access. Regional FTAs Bilateral FTAs ASEAN CEPT - AFTA Malaysia - Japan ASEAN - China Malaysia - Pakistan ASEAN - Korea Malaysia - New Zealand ASEAN - Japan Malaysia - India ASEAN - India Malaysia - Australia ASEAN - Australia & New Zealand Malaysia - Chile ASEAN - Hong Kong Malaysia - Turkey Ministry of Plantation Industries and Commodities www. mpob. gov. my

2. Addressing Issues Through Signing of MOU or Trade Co-operation • Besides FTA signing, Mo. Us are also signed between research institutions in Malaysia and their counterparts in selected importing countries to collaborate in PO research, development and promotion of palm-based food and non-food products in importing countries, such as China and India. Ministry of Plantation Industries and Commodities www. mpob. gov. my

3. Enhancing R&D Activities • R & D activities are focused on increasing PO consumption and producing high value added products for the export market. The national PO industry is encouraged to explore and expand its business into markets that are considered to be niche markets for greater value. • R & D activities are also focused to find new uses of PO products and increase value of downstream products. Ministry of Plantation Industries and Commodities www. mpob. gov. my

4. Promotion And Expansion of Palm Oil Markets • Promotion and expansion of PO markets through participation in exhibitions, trade expos, technical missions, organised by agencies or at ministerial level in order to raise awareness of the benefits of palm oil (eg. Palm Oil Trade Seminar (POTS), Palm Oil Promotion and Technical Mission etc). • MPOB Regional Offices abroad also continue working with authorities and industry players overseas to increase the uptake of PO for food and non-food sectors. Ministry of Plantation Industries and Commodities www. mpob. gov. my

5. Certification of Palm Oil Via MSPO • The MSPO Scheme, mandated in 2020 is a step towards creating a globally accepted sustainability system and branding Malaysian PO to become a global consumers’ choice. This will open wider market access to Malaysian sustainable PO. Ministry of Plantation Industries and Commodities www. mpob. gov. my