SHANGHAI (July 10): The Malaysian Palm Oil Council (MPOC) sees palm oil exports to the European Union (EU) stabilising in the long term and it will remain an important market for Malaysian palm oil despite challenges presented by the EU Deforestation Regulation (EUDR), as it is confident local players exporting to the region are able to meet sustainability criteria under the new rules.

“I think the demand for palm from the EU will still remain healthy because food manufacturers say it’s the most affordable oil and there’s sustainable supply from producer countries and we have met the sustainability criteria. Up to 90% of the palm or palm oil products that are exported to the EU are already sustainable. So there’s no worry that products going to the EU are not certified sustainable,” said MPOC CEO Belvinder Kaur Sron.

She said Malaysian palm oil producers exporting to the EU are “more ready” to meet the EUDR requirements with the Malaysian Sustainable Palm Oil (MSPO) certification compared to other competitors.

“We have done our gap analysis with the European Forest Institute with the MSPO, there’re just four gaps and I think we can close them,” she added. 

The four gaps identified were geolocation mapping of estates, e-tracing of palm oil products along the supply chain, labour policies and definition of deforestation-free.

“I’m confident we’re very close. We’ve been receiving very encouraging responses even from the EU, to say Malaysia has moved far ahead in terms of requirements.

“It’s a matter of the EU acknowledging the MSPO as a pathway for EUDR. That’s all we want to see. They have said they are not going to endorse any certification scheme but (we hope for) at least an acknowledgement (from the EU) so that our exporters can start using the MSPO to comply as a due diligence pathway for EUDR,” Belvinder told The Edge.

However, the issue with the EUDR, palm oil producers say, is that it cuts out smallholders from the EU market as it will be harder for them to comply with the requirements compared to the “big boys” or established plantation companies with ample resources.

“So, this is where MSPO is moving fast to ensure independent and organised smallholders are certified but it will take some time,” she said.

EU operators and traders placing relevant products on the EU market will need to comply with the new rules by December 30, 2024.

According to data from the Malaysian Palm Oil Board (MPOB), Malaysian palm oil exports to the EU have shown a declining trend, falling since 2019 from 2.09 million tonnes to 1.07 million tonnes in 2023. 

“Malaysian palm oil’s three largest markets are India, China and the EU but we have been dependent on the EU for a long time. In fact, over the years, EU imports of palm oil from Malaysia and Indonesia have been declining, overtaken by Latin American palm oil. So, it’s important to look for new markets,” Belvinder said.

The MPOC has been encouraging palm oil players to make a strategic shift to grow and expand in new markets, namely Africa, the Middle East and Central Asia.

Although small in volume relative to shipments to the EU, exports to Kenya and Turkey have risen over the last few years. Kenya imported 920,000 tonnes of palm oil last year, rising from 760,000 tonnes in 2022 and 670,000 tonnes in 2021.

“Africa is the new frontier market with its huge population and low per capita consumption of oils and fats at 12-15 kg compared with the global average of 31 kg. Kenya bought close to 1 million tonnes last year and there is potential in East Africa from Uganda, Tanzania and Mozambique,” Belvinder added.

In the Middle East, thanks to the free trade agreement between Malaysia and Turkey, Malaysian palm oil has an edge over Indonesian exports of the commodity to the country.

“For the last nine years, Turkey has been a Malaysian market and we want to retain these markets. Confectionaries produced in Turkey are exported to Europe and these are high end products,” Belvinder explains.

She added that Malaysia is well positioned to export more palm oil to Saudi Arabia with its sizeable number of pilgrims and tourists, given local palm oil producers’ Halal credentials while also establishing a foothold for MSPO-certified palm oil.

Meanwhile, Uzbekistan in Central Asia saw palm oil imports from Malaysia more than doubling last year to 50,567 tonnes from 2022 while total imports by the region rose 25.52% to 75,026 tonnes.

“They (palm oil exports to Central Asia) may be small but there is potential as new areas for us,” says Belvinder.

“We need companies to address these new markets but it will take time. The MPOC has been participating in a lot more exhibitions where we can bring smaller companies and they can introduce their products in these markets,” she added.

MPOC is a federal government agency dedicated to positioning Malaysia as the global leader in certified sustainable palm oil.

Belvinder was in Shanghai as part of deputy minister of plantation and commodities Datuk Chan Foong Hin’s working visit and agri-commodity promotion delegation to China.

Source : The Edge Malaysia