Outlook for Malaysian Palm Oil Exports to Asia Pacific Region (excluding China) in 2020

The Asia Pacific is one of the vibrant economic regions in the world. In 2019, the total GDP value of Asia Pacific was USD 11.55 trillion which is contributed about 13.2% to the global GDP value. The Asia Pacific includes several emerging countries like Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand. These emerging countries contribute enormously to the growth of the Asia Pacific economy. However, the Asia Pacific region has also been hit hard by the coronavirus pandemic in the first quarter and is recovering from a severe recession. Most of the countries in the world anticipated a negative economic growth for the year 2020. The chart below shows the forecast for the change in the economic growth in 2020 for the Asia Pacific countries due to the coronavirus pandemic.

Chart 1: Change in Economic Growth (2020 Estimates)

Source: Krungsri Research

The Asia Pacific is an important market for Malaysian palm oil. In 2019, the region imported 10.9 million MT of oils and fats and palm oil was the main imported oil with a share of 61.8% which equals 6.7 million MT. With the population of 933 million people, the consumption of oils and fats was about 39 million MT and the range caput use was around 14.2 kg to 33.9 kg compared to the world average caput use was 30.8 kg in 2019.

Table 1: Oils and Fats Situation in the Asia Pacific

1000 MT 2015 2016 2017 2018 2019
Production 70,793 66,445 76,014 76,021 83,056
Exports 51,588 46,097 52,371 53,506 56,543
Imports 9,071 8,578 9,470 10,139 10,884
Consumption 27,270 29,926 31,323 35,609 39,382

Source: Oil World

Indonesia, Malaysia, Thailand, Japan, and the Philippines are the leading producers of oils and fats in the region which accounted for 93.7% of oils and fats production in the Asia Pacific region. The most produced oils in the region are palm oil, soybean oil, and coconut oil. Palm oil is the main edible oil consumed in the region with a share of 67.9% from 39.4 million MT of oils and fats consumed. The main palm oil consumers are Malaysia and Indonesia due to the high biodiesel mandate in both countries. In the food sector, palm oil is mainly used in the household, HORECA sector, and food processing industries.

Malaysian Palm Oil

­In 2019, Malaysia exported 3.2 million MT of palm oil and palm products to the Asia Pacific region. The top importers of MPO in the Asia Pacific are the Philippines, Vietnam, Japan, and South Korea which imports about 67% of the total Malaysian palm oil to the region.

Country (1000 MT) 2016 2017 2018 2019 Jan-Nov 2020 Jan-Nov 2019 Change (MT) Change (%)
Philippines 625 752 689 629 637 593 44 7.48
Vietnam 556 633 462 595 426 545 (120) (21.96)
Japan 456 503 459 498 410 450 (40) (8.83)
South Korea 386 404 365 423 405 384 21 5.51
Singapore 353 416 379 362 274 321 (46) (14.41)
Taiwan 201 222 218 224 198 204 (5) (2.69)
Australia 125 142 137 145 138 135 3 1.97
Myanmar 198 134 91 76 39 70 (31) (44.90)
New Zealand 17 23 24 21 28 20 8 41.10
Indonesia 3 2 2 196 19 191 (172) (90.09)
Others 24 31 31 26 23 25 (1) (5.02)
Total 2,946 3,262 2,857 3,196 2,598 2,937 (339) (11.55)

Source: MPOB

The import of palm oil in this region is growing driven by the expanding development in the food and beverage sector led by the HORECA industry. Also, the growth is attributed to the improving GDP, rising per capita income, rapid urbanization, and the growing middle-class consumers in the region.

From January to November 2020, Malaysian palm oil export to the Asia Pacific region decreased by 339,193 MT or by 11.55% compared to the last year. This was mainly due to the lower imports by Vietnam, Japan, Indonesia, and Myanmar.

Philippines retained its position as the main destination of the Malaysian palm oil exports region which recorded the highest changes in volume about 44,312 MT or by 7.48%. It showed an improvement in Malaysian palm oil export to the Philippines after the drop in 2019. The main reason for the increase in palm oil demand is the price spread between palm oil and coconut oil which makes it more attractive for domestic consumption of palm oil, especially for food applications. For September, the price spread of coconut oil and palm oil was USD517 compared to USD177 in January 2020 which increased about USD340 or by 192%. According to a USDA report, for marketing year 2020/21, coconut oil production is expected to decline due to the reduction in copra harvests and the trees will face biological rest after two consecutive years of heavy nut-bearing. Low coconut oil production will prompt an increase in palm oil imports. For 2020, it is anticipated that Philippines coconut oil production will drop 222,000 MT or 18.6% to 972,000 MT compared to 2019 figure.

For South Korea, Malaysian palm oil export to South Korea has registered an increase of 21,178 MT or 5.51% compared to the same period in 2019 which is due to the low import of Indonesian palm oil. Based on the Oil World data, for the period Jan to October 2020, South Korea imported 303,000 MT of Indonesian palm oil, down by 109,000 MT or 26% compared to the same period in 2019. In South Korea, palm oil is primarily used for food processing, especially instant noodle production. Based on the article written by The Korea Herald, the demand of instant noodle boosts during the COVID-19 pandemic outbreak. The biggest instant noodle company in South Korea, Nongshim is estimated to have recorded an operating profit of 33.1 billion won which up 78% from the previous year. This has created the stable demand of Malaysian palm oil in South Korea.

Malaysian palm oil exports to Vietnam registered a decline of 119,729 MT or 22% compared to the same period in 2019, mainly due to an increase in palm oil import from Indonesia and a high import of soybeans from the USA It is reported that for the period January to October 2020, Indonesian palm oil import in Vietnam increased by 203,000 MT or 76% to 470,000 MT compared to same period in 2019 due to the competitive price offered by Indonesian suppliers. Also, Vietnam is currently recovering from the 2019 African Swine Fever (ASF) outbreak and as a result, it is anticipated that there will be an increase in soybean domestic crushing activities. For this year, it is estimated that 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 local consumption. This will translate into slow palm oil imports in Vietnam. Based on the Oil World data, USA soybean import in Vietnam recorded a tremendous increase of 344,300 MT or 119.67% to 632,000 MT for the period January to September in 2020 compared to the same period in 2019.

Malaysian palm oil exports to Indonesia showed the biggest drop of 171,628 MT or 90% compared to same period in 2019. The drop is mainly due to the price factor. In 2019, Indonesia took advantage during the low palm oil price period to import Malaysian palm oil for its biodiesel sector. The main palm oil products imported by Indonesia in 2019 were RBD Palm Stearin and PFAD about 185,321 MT which accounted for 94.6% of total Malaysian palm oil import in the country. While, for the period January to October 2020, the main palm oil products imported by Indonesia were PFAD and CPO about 8,961 MT and 5,999 MT respectively. These two products accounted for 80.8% of total Malaysian palm oil import for the said period.

Myanmar continuously showed a drop in Malaysian palm oil import due to strong competition from the Indonesian palm oil. Myanmar has good potential for palm oil import but because of the price sensitive nature of the market, Indonesia dominates the market with a 90% share.

The Outlook of Malaysian Palm Oil Export for 2020.

Due to the coronavirus outbreak, most of the countries imposed lockdowns to restrain the spread of the virus in the country. Fewer people dining out which most of the food services outlets are closed. This has led to a drop in palm oil consumption in this sector. Asia Pacific countries import palm oil mainly for food purposes which have given a big impact on the import of Malaysian palm oil in this region. Therefore, for the year 2020, it is estimated that Malaysian palm oil will drop about 9% to 10% due to this global pandemic.

Prepared by : Rina Mariati 

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