From January to August 2021, Malaysian palm oil export to the Europe region was recorded at 1,130,658 MT, a decrease of 329,878 MT or by 22.6% from 1,460,536 MT recorded during the same period of 2020. The main reason for the drop was due a combination of tightening supply of palm oil as lower production caused by labour shortages and lower demand from the food manufacturing and biodiesel sectors.  Netherlands, Italy and Sweden are the three biggest destinations of Malaysian palm oil in the EU. In Italy, consumption of palm oil is practically the same as the newly opened biofuels plants went into full operation to fulfil compulsory blending mandates this year. This plant has the capacity to process 750,000 MT of vegetable oils and waste fats and oils on annual basis.

Netherlands remained as the leading importer of Malaysian palm oil in the EU and Europe region with 642,398 MT, but this is a decrease of 104,608 MT or by 14% 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 more competitively priced compared to Malaysia. Nevertheless, it is expected as the widening price spread between soybean oil and palm oil in the recent months will see a renewed interest in palm oil. Netherlands is expected to remain firm as a palm oil importing country as they are the main hub for palm oil to be re-exported to many countries in the Europe region.

Greece recorded the largest increase in import volume, importing a total of 39,265 MT between January and August 2021, an increase of 334% compared to the same period of the previous year. This is mainly due to the country opening up the economy after the Covid lockdowns. In addition, despite the current price of palm oil it is still much lower than other competing oils such as sunflower oil and the price gap makes palm oil 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 47.4% 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 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