KUALA LUMPUR (April 29): Following Indonesia’s palm oil export ban, Malaysia may not be able to fill the supply gap to meet global palm oil demand, according to Malaysian Palm Oil Board (MPOB) director-general Datuk Dr Ahmad Parveez Ghulam Kadir.
Indonesia, the world’s leading producer and exporter of the edible oil, stunned global markets on Wednesday (April 27) when it imposed an export ban effective Thursday.
“With the Indonesian palm oil export ban, it is expected that the global demand for palm oil would move to Malaysia as Malaysia is the second-largest exporter of palm oil after Indonesia.
“However, Malaysia may not be able to absorb much of the excess demand given the huge market size left by Indonesia. In addition, Malaysia is still facing an issue with palm oil production due to labour shortage even though the production situation is now improving,” Parveez told theedgemarkets.com on Thursday when contacted.
The MPOB director-general said that for the period of January to March 2022, crude palm oil (CPO) production stood at 3.80 million tonnes, a 3.9% increase against the 3.66 million tonnes in the same corresponding period a year prior.
Parveez noted that in 2021, Indonesian palm oil exports represented 56% of world palm oil exports, while runner-up Malaysia accounted for only 30.5%.
“In view of Indonesia’s large contribution in the world oil and fat market, this drastic step taken by Indonesia will certainly have an impact on the global oil and fat demand and supply balance arising from the Russia-Ukraine conflict and the severe drought in South America.
“This would affect many countries in the world, especially the major palm oil importers such as China, India and the European Union (EU),” he added.
Meanwhile, Parveez said that while CPO production of Malaysian palm oil producers is expected to increase with the labour situation expected to improve, he added that this will still be insufficient to fully meet global market demand.
“Since the government is now opening up the national border, we are expecting an improvement in the labour situation in Malaysia, thus an improvement in CPO production.
“Malaysia may be able to absorb some of the market demand. However, given the huge market size left by Indonesia, this would still be insufficient to fully meet global market demand,” he said.
Parveez said MPOB believes that the current measures set by the government — which include export taxes on CPO, crude palm kernel oil (CPKO) and refined, bleached and deodorised palm kernel oil (RBDPKO) — are sufficient to protect the Malaysian palm oil industry from the effects of the global supply-demand imbalance.
“However, the Ministry of Plantation Industries and Commodities is constantly monitoring the developments of the current situation and is ready to take appropriate measures if needed,” he added.
On Thursday, Minister of Plantation Industries and Commodities Datuk Zuraida Kamaruddin said she was confident that Malaysia will be able to meet global demand for palm oil following Indonesia's move to halt its palm oil exports.
Zuraida said that with foreign labour set to enter Malaysia, the country will be able to meet international demand by raising production.