Positive Palm Oil Outlook in East – Suez Region (Jan – Jun 2021)

1. İntroduction

The East of Suez region consists of 13 countries, i.e. Armenia, Bahrain, Georgia, İran, İraq, Jordon, Kuwait, Oman, Qatar, S. Arabia, Turkey, UAE, Yemen and Syria. The population of the region is about 326 million and demand for oils and fats is significant.  The East of Suez region is one of the major consumers oils and fats in the world and is a net importer of oils and fats who  mainly depend on imports to meet local demand. Total import of oils and fats were recorded 4.6 Mn MT. last year. Major oils consumed in this region are sunflower oil, palm oil and soybean oil. Turkey, İran, Saudi Arabia are the biggest importers of oils and fats. Palm oil imports by Turkey, İran and Saudi Arabia reached 1.85 Mn MT in 2020 and as these 3 countries are the biggest player of oils and fats in this region, this article  will focus on these countries.

2. Significant Increase in Malaysian Palm Oil Export to Iran

From Jan – July 2021, Malaysian palm oil export to region was recorded at 992, 837 MT compared to 803,257 MT in Jan- July 2020, an increase of % 23.6 or 189,580 MT. İran emerged as the leading importer of Malaysian palm oil with a total of 309,704 MT an increase of 246,665 MT or by 391% compared to the first half of the 2021. This is primarily due to the gradual easing of the US led sanctions on the country which supported the increase of imports. The second reason is that Iranian stocks of vegetable oils were very low at the end of last year, creating high demand for oils and fats in 2021.   Due to the sanction imposed on İran, banking / payment is the main challenge in doing business with İran. Government Trade Commission (GTC) is the main government body to buy palm oil and distribute to İranian oils and fats refineries.

3. Turkey and Saudi Arabia to remain mainstays despite temporary setback

Turkey is the second biggest importer Malaysian palm oil in East – Suez region. Turkey’s imports of Malaysian palm oil import declined by about % 8 or 25,660 MT compared to same period of last year. Turkey was on total lock down between April – May 2021, therefore drop in demand from the HORECA sector as the tourism industry suffered from low tourist arrivals, while lockdowns have limited the amount of dining and gatherings.

Saudi Arabia’s Malaysian palm oil import also declined by76,000 MT or 37% compared same period last year. The decline was due to a combination of the competitive price of Indonesian palm oil and the COVID pandemic which impacted demand to cater for the Hajj season. For the second consecutive year pilgrimage arrivals were severely limited and this adversely affected demand from the catering industry which usually consumes high volume of edible oils in food preparation for Haj pilgrims.

 MPO Exports to East of Suez Sub-Region (MT)
Country Jan- June 2021 Jan- June 2020 Balance (vol.) Changes (%)
Bahrain 2.828 6.048 -3.220 -53
Georgia 8.704 7.515 1.189 16
Iran 309.704 63.039 246.665 391
Iraq 7.848 22.866 -15.018 (66)
Jordan 15.242 6.152 9.090 148
Kuwait 12.300 12.409 -109 -1
Oman 51.834 47.705 4.129 9
Qatar 12.180 13.129 -949 -7
S. Arabia 129.131 204.786 -75.655 -37
Turkey 299.846 325.506 -25.660 -8
UAE 74.826 39.844 34.982 88
Yemen 68.394 54.258 14.136 26
Total 992.837 803.257 189.580   23,6

4. Demand is Likely to Pick Up for Palm Oil in İran and Turkey.

The Increase trend on Malaysian palm oil export to East – Suez region is expected to continue in the second half of the year.  İran will be the market leader to contribute to the rise in Malaysian palm oil import in the region. According to a statement issued by İranian Embassy in Kuala Lumpur, İran’s import of Malaysian palm oil registered a five – fold increase Jan – May 2021.  The country now targets an additional 650,000 MT for Jun – Dec 2021 period.

Malaysian palm oil import from Turkey is also likely to pick up. Several factors which will contribute to increase in demand in Turkey are the growing demand in the food manufacturing and food services sector driven by the tourism sector as well as population growth. The Government of Turkey has already lifted curfew nationwide curfew on the 1st of July and cafes and restaurant are now open. Tourist arrivals have doubled in July 2021 and is expected to increase in August and September compared to same period of last year. For now, Malaysia has the advantage through favourable tariff from the MTFTA and Malaysian palm oil will dominate the Turkish oils and fats.

Saudi Arabia is the third largest importer of Malaysian palm oil in the region and in the second half of the year we expect declining growth in Malaysian palm oil imports as Saudi Arabia tries  to encourage more Saudis to be involved in all sector and be less dependent on foreign workers through implementation of multiple levies. Less demand, underpinned by Indonesia’s discounts of at least US$10 according to multiple industry sources has led to the severe drop of Malaysian palm oil imports.

5. Conclusion

The region has a steady growth of palm oil through demand in the food sector as it is mainly used as cooking oil, industrial fats, and even vegetable ghee. The declining production of oilseeds and strong demand drive in the main importing countries has led to increased imports of oils & fats especially palm oil.

Prepared by Hakan Alkan

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