Malaysian Palm Oil Exports to Sub-Saharan Africa is Projected to Rise in The Second Half of 2021

Sub-Saharan Africa is a very important market for Malaysian palm oil exports. In 2020, Malaysian palm oil exports performance to the SSA region recorded the highest growth of 34.1% increase over 2019 to reach 2.702 million MT. Despite being concerned about the lack of demand due to the Covid-19 pandemic, the countries in the SSA region have exceeded all the expectations by importing and consume more Malaysian palm oil last year than they have had in the past.

After a record year in 2020, Malaysian palm oil intakes by Sub-Saharan Africa have been quite slow this year. In the first half of 2021, the exports of palm oil from Malaysia to the countries in Sub-Saharan Africa registered a volume of 982,929 MT, which is a decrease of 225,942 MT or 18.70 % when compared with the same period of 2020. It was the lowest 6 months total of MPO exports volume to the region since 2016. On a brighter note, despite lower exports volume, the export value of Malaysian palm oil increased by 22.6& to RM4.113 billion compared to RM3.356 billion in Jan-Jun 2020 due to the higher price of palm oil in the past six months.

Kenya and Mozambique Still Imports More than last year

Out of 44 countries and territories in the SSA region, only two countries imported more Malaysian palm oil in the first half of this year compared to the similar period in 2020. Kenya was the biggest importer of MPO from the region with an import volume of 265,919 MT, up by 91.7% from 138,730 MT imported a year earlier. The surge in MPO imports in Kenya can be attributed to an increase in demand for CPO as CPO import duty is lower than import duty for processed palm oil. 93.2% or 247,964 MT of Kenya’s imports is in the form of CPO/CPL.  Besides satisfying increasing demand from local refineries in Kenya, Malaysian CPO imported by Kenya is also rerouted to the neighbouring country of Tanzania and other land-locked countries such as Uganda, Rwanda, Burundi, and the Democratic Republic of Congo.

Mozambique is the second top importer of MPO from the region and the only other country from the region, besides Kenya that registered an increase in MPO import so far this year. Most of Mozambique’s import is in the form of CPO/CPL with 100,893 MT of import volume. In addition to fulfilling its domestic requirement, part of Mozambique’s palm oil import is also rechannelled to the neighbouring countries such as Malawi, Zimbabwe, and Zambia.

Other major importing countries such as South Africa, Ghana, Tanzania, and Nigeria also recorded lower imports volume of MPO this year with South Africa show a reduction of 41%. Benin, which used to be a major importer of MPO with annual imports volume ranging between 300,000 MT to 400,000 MT, only imported 17,598 MT so far, a 68.84 percent drop compared to last year. Benin’s neighbour, Togo imports decreased by 60,708 MT from 104,847 to 44,139 MT.

Contributing Factors

After managing to cushion the impact of the Covid-19 pandemic in 2020, the year 2021 proved to be a different challenge to most countries in the region. The region, in general, experienced an initial rebound in growth in the first quarter of 2020, but the economy has subsequently faced headwinds as Covid-19 continues to weigh on SSA’s economic recovery in the second half of 2021. IMF projected that Sub-Saharan Africa will be the world’s slowest-growing region in 2021 with a rate of 3.4 percent.  Based on current forecasts, per capita GDP in many countries in the region is not expected to reach pre-crisis levels until the end of 2025.

In addition to the lackluster economic activities, the increase in palm oil prices and high inflation rates in most Sub-Saharan Africa countries have resulted in lower purchasing power of most SSA residents. Statista projected that the annual inflation rate of West African countries to reach an average of 9.5 percent in 2021 with Sierra Leone and Nigeria expected to record the highest rate of inflation, reaching 15.5 percent and 12.7 percent, respectively.

The decrease in RBD palm oil imports by the region especially from Benin, Niger, South Africa, and Togo can be attributed mainly to higher export prices of RBD palm olein in the first six months of this year compared to the last year’s prices. Average RBD palm olein (FOB) in Jan-Jun 2021 has increased to RM4304 per MT from RM 2622 in Jan-Jun 2020 period resulted in a reduction in imports by 59.5% to 181,687 MT from 448,770 MT.

Competition from other palm oil exporting countries and locally produced palm oil also contribute to the lowering imports of MPO by the SSA region. The recent revision in Indonesian export taxes and levies which made Indonesian refined palm oil more competitive also can be taken as a reason for the drop in Malaysian palm oil exports to the region especially for processed palm oil is. According to limited information made available by Oil World, Indonesian palm oil exports to a few countries in the region have increased especially to South Africa and Kenya by 32% and 24% respectively.

Based on reports from various sources, palm oil production in West African countries, namely Nigeria, Ghana, Cote D’Ivoire, and Sierra Leone has increased in the past few months resulting in less reliance on imports. For example, Oil World reported that cumulative shipments from Ivory Coast were boosted to a record 151,000 MT in Jan-May 2021, up 38% from a year ago, cited high prices on the world market and tight export supplies in other key countries as the reasons for the uptrend of Ivorian palm oil exports.

For countries that rely on cross-frontier trade, such as Togo and Benin, land border closures have had a deep impact on their economy, hence lower imports of Malaysian palm oil so far this year. Malaysian palm oil imports by Togo and Benin have dropped by 68.55 % and 70.72% respectively.  As the country’s borders still remain closed, business and exports are blocked between several of their neighbours in the region, such as states like Nigeria, Ghana, Burkina Faso, Mali, and Niger.

Demand is expected to pick up in the second half of 2021

Based on the trend in the past few years, the region tends to import more Malaysian palm oil in the second half of the year against the first six months as shown in the figure below.

Fig 1: Monthly MPO Exports to SSA (2018-2021), MT

Using the above as a guideline and the past four years imports data as a basis for the forecast, MPO shipment to the SSA for Jul-Dec 2021 is projected to reach 1.224 million MT, with monthly average of about 205,000 MT, bringing the total export for the whole year to 2.208 million MT, 18.5% lower than last year total of 2.702 million MT.

Table 1: MPO Half-Yearly Exports (MT) to SSA (2017-2019)

Year Jan-Jun July-Dec Jan-Dec Jul-Dec Percentage (%)
2017 1,126,010 1,308,055 2,434,065 53.74
2018 1,000,937 1,325,027 2,325,964 56.97
2019 983,433 1,031,763 2,015,196 51.20
2020 1,208,285 1,493,732 2,702,017 55.28
2021 982,874 1,224,860*   2,207,734*   55.48*
  • July-Dec 2021 – Forecasted Volume

The export volume MPO to the SSA region in the second half of this year largely depends on two main factors; price and the economy. As Malaysia’s crude palm oil production is expected to increase quite marginally in the next few months, the price of crude palm oil is expected to remain strong. Estimates of the expected economic recovery in the second half of 2021 are uncertain, with outcomes depending largely on the duration of the current Covid-19 outbreak and the effectiveness of the government’s policy responses. Based on WHO estimates, vaccination rates in Sub-Saharan Africa were low in the first half of 2021 compared with the rest of the world, with less than 2% of the continent’s population is fully vaccinated but will improve in the coming quarters. August 2021 was the start of monthly shipments of vaccines acquired by the African Vaccine Acquisition Trust (AVAT) to the African Union member states with a target of delivering almost 50m vaccines before the end of December. In total African, Union member states have collectively purchased 400 million doses of vaccines, sufficient to immunise a third of the African people and bring Africa halfway towards its goal of vaccinating at least 60 percent of the population. For the remaining half of the doses required, international donors have committed to deliver through the COVAX initiative.

The demand outlook for palm oil in the region for the rest of the year is positive, supported by low stock levels in the importing countries and the expected reopening of the various sectors of the economy, amid improving COVID-19 vaccination rollouts in Africa.

Prepared by Iskahar Nordin

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