Malaysian Palm Oil Import Performance in Saudi Arabia in 2020

Over the past 5 years, Malaysian palm oil exports to Saudi Arabia was on the upward trends except for the year 2019 when imports started to move downward, due to aggressive selling and more competitive price offered by Indonesian suppliers. However, imports of palm oil have picked up again this year.  From Jan to August 2020 it has already exceeded the import volume recorded in 2019.

Saudi Arabia – Malaysian Palm Oil Import

  2015 2016 2017 2018 2019 Jan – Aug 2020
PO 67,081 177,161 376,551 371,380 164,821 244,232
PKO 10,162 11,980 12,024 8,416 6,906 4,900
PKE 140,847 175,113 128,976 141,666 123,045 169,767
Oleochemicals 24,545 26,036 24,789 22,743 23,854 14,957
Finished Products 24,398 16,544 15,782 20,732 13,586 10,556
  267,033 406,834 558,122 564,937 332,212 444,412

Source: MPOB

Crude palm olein filled most of the palm oil import basket due to its zero percent duty advantage.  Besides palm oil, palm kernel expeller (PKE) is being imported by the country.  An increase in PKE import is to supply the growing animal feed market.

2020 has been a very good year for Malaysian palm oil in Saudi Arabia.  Despite facing with petroleum price crisis, which has caused the nation to revise its national budget and COVID 19 which affected its tourism industry, the import of Malaysian palm oil continue to record positive growth.

The country, effective on 30 June 2020 has revised its import tax structure on various imported goods.  Their revision has escalated the current duty structure around 0.5% to 15%.  Before that, most food items were bound by 5% import duty except for some raw material for the domestic food processing industry which are exempted from import duty.

Fortunately, palm oil is not affected by the tax revision and the import duties remain status quo for crude and refined products at 0% and 5% respectively.

The most glaring factor of the huge leap of Malaysian palm oil in the first eight months of 2020 is the lower intake of Indonesian palm oil.   During Jan – August 2020, the country only imported 55,000 MT of Indonesian palm oil against 264,000 recorded during the same period of 2019.  COVID lockdown and Indonesian biodiesel mandate are the likely factors contributing to lower Indonesian palm imported by the country.

Saudi Arabia has always been the Malaysian palm oil market, except in 2019 when the import has inclined towards Indonesian palm oil.  Price factors are the only determinant of Indonesian palm oil competitiveness.  However, based on the current trend, Malaysian palm oil will continue to dominate the market at least until the end of 2020 or up until the first quarter of 2021.

Besides palm oil, PKE is another growing sector to be observed.  The use of PKE in Saudi Arabia animal feed is expected to grow in tandem with the growth in the animal feed market. It is estimated that the sector to grow at 6% annually. 

In the recent import duty revision, the country has revised import duty on various dairy products such as follows:-

Products HS Code Previous Tariff Tariff as of 30 June 2020 Bound Rate
Milk powder for industrial purposes 04022110 5 15 15
Other milk, unsweetened 04029110 5 10 10
Other creams, sweetened 04029920 5 10 10
Butter 04059000 5 6 6
Dairy Spreads 04052000 5 15 15

Source: USDA, May 2020

An increase in import duty of dairy products could reduce imports of related products and encourage higher intake of relevant substitute, in the form of palm based margarine and palm based table spread.

Import of PKE is also showing positive growth with imports during Jan – August 2020 increased by 78.6%.  As Saudi Arabia has imposed ban the production of green forage effective in November 2018 as part the country’s move towards easing the pressure on renewable water resources, the country has to solely depend on imports of animal feed.  The situation reflected in higher import of PKE.  If this is the future direction of the country, the demand for PKE is expected to increase further. 

Prepared by  Fatimah Zaharah

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