From January to November 2021, Malaysian palm oil export to the Europe region was recorded at 1,560,075 MT, a decrease of 365,367 MT or by 19% from 1,925,442 MT recorded during the same period of 2020. The main reason for the drop was due a combination of a tightening supply of palm oil due to lower production caused by labour shortages, and lower demand from the food manufacturing and logistic issues, as a result of Covid-19 pandemic restriction measures. Another reason for the drop is due to lower demand in the biofuels sector, in which demand is shifting towards advanced biofuels in lieu of conventional biofuels as a result of RED II regulations. Netherlands, Italy and Sweden are the three biggest destinations of Malaysian palm oil in the EU.

Netherlands remained as the leading importer of Malaysian palm oil in the EU and Europe region with 891,997 MT, but this is a decrease of 102,586 MT or by 10.31% compared to the same period of 2020. This lower import volume can be attributed to the increased demand for Indonesian processed palm oil as the new tax structure enforced from January 2021 made their refined and processed products cheaper compared to Malaysia. Netherlands is expected to remain firm as a palm oil importing country as they are the main hub for palm oil exported to many countries in the Europe region.

Greece recorded the largest increase in import volume, importing a total of 41,659 MT between January and September 2021, an increase of 167% or by 26,045 MT compared to the same period of the previous year. This is due to the opening of the economy, and considering the current palm oil and sunflower oil price gap, palm oil is the most economical oil and thus is currently the preferred choice of edible oils in the country.

In the Eastern Europe and CAR, a sharp drop of imports was recorded by Ukraine and Uzbekistan. Price competition with Indonesian palm oil was the main reason for the significant drop in Ukrainian MPO imports, with Indonesian palm oil companies catering to bulk purchases coupled with attractive discounts. In Uzbekistan, the significant drop recorded was due to the revised duty structure on the imports of oils and fats and all fractions of palm oil which are now subjected to 5% duty besides other applicable taxes if imported from Most Favoured Nations (MFN) countries including Malaysia. The countries in the CIS region are still enjoying zero duty on the import of palm oil. As a result of the new duty structure, MPO exports to Uzbekistan have been greatly reduced.

Breakdown of MPO Exports (MT)

Exports of CPO and CPO certified palm oil (RSPO and ISCC certified) into the EU continue to be the biggest component of Malaysian palm oil exports to Europe, comprising 46% of the total. Higher uptakes are recorded mostly into Netherlands, Germany and Italy where palm oil is utilized in the energy sector. One of the reasons for the lower exports of Malaysian palm oil was shifting market demand in the energy sector, where the biofuels industry are shifting towards advanced and waste-based biofuels. Due to this reason, palm oil mill effluent (POME) exports from Malaysia are increasing in lieu of CPO and biodiesel. Another reason for the drop was due to competition from Indonesia since they changed their export duty structure for refined products. This is addition to the discounts given by Indonesian suppliers as according to industry sources, Indonesian suppliers have been aggressively offering discounted prices of their refined products in the European market, thus reducing the intake of supplies from Malaysia. Additionally, the supply situation in Malaysia had also contributed to the lower imports, in which shortage of labour that led to lower production.

Chart 1 : Breakdown of MPO Exports (MT)

Source: MPOB