Palm Oil Demand Outlook 2020 in Vietnam

Vietnam is the second-largest importer of Malaysian palm oil in the ASEAN region. In 2019, the country imported 1.09 million MT of oils and fats, out of which palm oil was the major imported oil with a share of 87% (947,000 MT). Soybean oil and lard are the most produced oils and fats in Vietnam with a share of 74% from their total indigenous oils and fats production. The demand for soybean oil is being influenced by the demand for feed from the local livestock industry. While lard is one of the main sources of oils and fats especially in the rural areas.

Source: Oil World

Vietnam is heavily dependent on import. In average for the past five years, 68.9% of oils and fats consumption in Vietnam was met by import. The consumption of oils and fats is driven by growth in the food and beverage sector. The sector has experienced strong growth due to growth in GDP, rising per capita income, rapid urbanization and growing middle-class consumers.

Source: Oil World

Palm oil is the most consumed edible oil in Vietnam with a share of 58.5% from total oils and fats consumption. Palm oil is mainly being used in the household, HORECA sector and food processing industries. It is estimated that the Vietnamese food service market will reach USD 65.03 billion by 2024 compared to USD 39.74 billion in 2019, CAGR of 13.05%. The growth of the food industry in this sector has spurred the demand for palm oil.

Malaysian Palm Oil Export to Vietnam (MT)
Product Jan-May 2020 Jan-May 2019 Change (MT) Change (%)
RBD Palm Olein 142,891 177,385 (34,493) (19.45)
RBD Palm Oil 46,746 47,192 (447) (0.95)
RBD Palm Stearin 17,071 13,028 4,042 31.03
Others 1,089 853 236 27.70
Total 207,796 238,458 (30,662) (12.86)

Source: MPOB

During the period January to May 2020, Malaysian palm oil exports to Vietnam have registered a decline of 30,662 MT or 12.86% compared to the same period in 2019. This is mainly due to the increase in palm oil import from Indonesia and high import of soybean from the USA. It is reported for the period January to April 2020, Indonesian palm oil import in Vietnam increased by 18,000 MT or 16.82% to 125,000 MT compared to the same period in 2019 due to the competitive price offered by Indonesia.

Also, Vietnam is currently recovering from the 2019 African Swine Fever (ASF) outbreak and as a result, it is anticipated there will be an increase in soybean domestic crushing activities. For this year, it is estimated the soybean import will increase to cater to the demand for domestic feed requirements which will also increase the availability of soybean oil in the market for consumption. This will translate into slow palm oil imports in Vietnam.

For the year 2020, it is anticipated that the Malaysian palm oil export to Vietnam will drop by 10% to 20% due to high soybean oil production and competition from Indonesian palm oil.

Prepared by: Rina Mariati 

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