The Asia Pacific region is a major and significant market for Malaysian palm oil. In 2020, this region imported 10 million MT of oils and fats and palm oil is the main oil imported with a market share of 60% or 6 million MT. With a population of 933 million, the consumption of oils and fats is about 39 million MT which makes the per capita consumption 24.9 kg against the world average caput use of 30.8 kg in 2020.

Asia Pacific is among the regions in the world where Malaysia has higher market share as compared to Indonesia. The Malaysian palm oil import in the region for the last five years has varied between 2.9 million MT to 3.2 million MT. In 2020, Malaysian palm oil import recorded a decline by 411,018 MT or 12.9% to 2.79 million MT when compared with the volume of 2019. The reasons behind the drop were increase in imports from Indonesia, recovery of African Swine Fever (ASF) outbreak which resulted in high availability of soybeans in the country and demand disruptions by the global pandemic, COVID-19.

Malaysian Palm Oil Import Analysis to Asia Pacific region

Within Asia Pacific region, Philippines, Vietnam, Japan, South Korea and Singapore are the main importers of Malaysian palm oil with a combined share of 82.7% of the total Malaysian palm oil exported into the region. However, between January to June 2021, Malaysian palm oil export to the Asia Pacific region declined by 400,812 MT or by 26.4% from 1,516,322 to 1,115,520 MT compared to the same period of 2020.

COUNTRY	Jan-Jun 2018	Jan-Jun 2019	Jan-Jun 2020	Jan-Jun 2021
Philippines	308,949	321,827	349,036	291,109
Vietnam	222,709	272,451	260,910	146,737
Japan	227,500	244,580	230,044	208,493
South Korea	205,133	201,466	226,651	168,283
Singapore	232,250	190,150	206,280	86,772
Taiwan	96,069	107,621	103,622	109,974
Indonesia	1,181	94,301	17,256	1,713
Australia	58,736	67,882	79,377	58,608
Myanmar	44,672	38,557	19,763	17,645
New Zealand	10,068	7,807	10,273	9,040
Others	13,573	10,820	13,121	17,148
Total	1,420,840	1,557,463	1,516,332	1,115,520

Source: MPOB

The main reason for the decline was the revision of the Indonesian export taxes and levies on crude palm oil which has in turn increased Indonesia’s price competitiveness in refined palm oil products export. This has resulted in a scenario where there will be a higher demand for PPO from Indonesia and major CPO-consuming countries will look to Malaysia for supplies. Since Asia Pacific countries are mostly PPO importers this gives an edge to Indonesian palm oil supplies, which can be seen in the increase of their PPO exports in countries in this region.

Singapore

Imports of Malaysian palm oil in Singapore during Jan – Jun period of 2021 declined by 57.9% when compared with the same period of last year. This was mainly due to the slow demand for biodiesel during the global COVID -19 pandemic. Singapore imports of oils and fats are mainly for biodiesel production as about 80% of oils and fats consumption in Singapore is for biodiesel. Singapore is also the international biofuel terminal and also a hub for biodiesel trade. In 2019, Malaysian palm oil import in Singapore was at 361,898 MT out of which 33% was crude palm oil (CPO). Singapore is the only country in the Asia Pacific region that imports Malaysian CPO. From January to June 2020, Singapore imported 56,713 MT of CPO, however, due to the high CPO price this year there were no CPO import by the country.

Vietnam

Malaysian palm oil imports in Vietnam are registering a decline of 43.7% during the period in reivew. Apart from the increase in the Indonesian palm oil import in Vietnam, the country had high availability of soybean oil in the market due to an increase in soybean domestic crushing to meet the domestic feed requirements. The recovery from the 2019 ASF outbreak increased the import of soybeans into Vietnam which in turn affected palm oil consumption and import. Furthermore, the COVID-19 restriction also resulted in widespread closures of restaurants, hotels and canteens which reduced palm oil consumption in the country. As a result, consumers were forced  to stay at home and do home cooking which saw a shift in oils and fats consumption as the preferred oil for home cooking in Vietnam is soybean oil and rice bran oil.

South Korea

South Korea has also registered a decline of 25.7% in the imports of Malaysian palm oil in the given period. The biodiesel sector has been the main driver of rising palm oil imports in South Korea since 2007/08 and over the years, palm oil is preferred over soybean oil due to its price competitiveness. However, the COVID-19 pandemic has dampened the demand for palm oil in the South Korean biodiesel sector which caused a decline in Malaysian palm oil export to the country.

Japan

Malaysian palm oil export to Japan also declined by 9.3% in this period  mainly due to lower imports of RBD palm stearin import which is mainly used as feedstock for FIT-supported power-plants. Price is the main driver for the utilization of RBD palm stearin in the sector and during the first half of 2021, there was a decline in RBD palm stearin imports due to its high prices. This scenario resulted in a decline in the import from Malaysia by 29,760 MT or 84% to only 5,632 MT compared to 35,392 MT in the same period in 2020. Furthermore, the third wave of COVD-19 infection in the country has forced the Japanese government to impose stricter containment measures to curb the pandemic which include movement control. Also contributing to the decline was a reduction in demand from the Japanese HORECA sector when the Japanese government suspended the domestic tourism support programme.

Malaysian Palm Oil Exports Prospects in 2022

Keeping in view the challenges posed by covid-19 and off and on lockdowns and movement restrictions, it is anticipated that Malaysian palm oil import in the Asia Pacific region will drop by about 10% but will in all likelihood see an increase in the first quarter of 2022.

One of the factors which supports palm oil in this region is that it is not limited to only the food services, food retails and the tourism sector, but also include the non-food sectors such as oleochemicals, biodiesel and bio-energy sectors. The growth in these sectors will help to boost palm oil demand in the importing countries.

To maintain its grip in this region, Malaysian palm oil suppliers will have to ensure that they stay competitive in the market as it is anticipated that the demand from food and HORECA sector will pick up in 2022. Malaysian palm oil suppliers enjoy high confidence in terms of quality and supply reliability among the major industries in this region and we must capitalize on this and continue to maintain our stronghold in these markets.

Prepared by Rina Mariati  and Muhammad Kharibi

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