This article first appeared in The Edge Financial Daily on March 26, 2019

KUALA LUMPUR: Malaysia has taken steps to explore new markets for its palm oil amid risks of declining demand from Europe, its second-largest market, said Primary Industries Minister Teresa Kok.

Speaking to reporters at the Parliament lobby yesterday, Kok shared that her ministry, through the Malaysian Palm Oil Council, has begun its survey into new markets, namely the Middle East and Africa.

“Deputy Primary Industries Minister Datuk Seri Shamsul [Iskandar Mohd Akin] already went to Pakistan earlier this year.

“In April, we will head to Africa and countries like Saudi Arabia and Ethiopia. These are new markets for us. They have already imported [palm oil from us] but we seek higher imports, which is why we are meeting with their governments [to facilitate this],” said Kok.

She acknowledged that there is a need to quickly capture these markets, considering other competing oil products, like rapeseed oil, have also made entry into several countries eyed by Malaysia to compensate for a possible loss of demand in Europe.

On a related matter, Kok said she will meet representatives from the European Union (EU) in May to address the possible EU sanction against palm oil.

The EU, which is Malaysia’s second-largest importer of palm oil after India, is in the midst of passing a legislation to phase out the use of palm oil as a biofuel by 2030, on grounds that oil palm plantations contribute to deforestation. The EU Parliament and its member countries have two months to decide whether to accept or veto the proposed legislation.

In 2018, Malaysia exported a total of 1.91 million tonnes of palm oil to the EU — down 4% from 1.99 million tonnes recorded in 2017 — accounting for 12% of Malaysia's total 2018 palm oil exports, data from the industry regulator Malaysian Palm Oil Board showed.

Malaysia’s biggest EU buyers last year were the Netherlands with 912,592 tonnes, followed by Italy with 351,221 tonnes, and Spain with 361,640.

The proposed phase-out of palm oil is expected to cut palm oil exports of both Malaysia and Indonesia by about 6.5 million tonnes, equivalent to about 9% of total palm oil production, AllianceDBS Research guided previously.