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India’s edible oil imports fell to their lowest level in four years in Feb-25, driven by a decline in soy and sunflower oil imports. However, palm oil imports rebounded, rising 36% month-on-month (MoM) to 374 thousand metric tons (mt) after hitting a 14-year low in Jan-25. Despite the slight recovery in palm oil imports, two consecutive months of lower-than-usual imports have depleted India’s stock levels. As a result, the world’s largest vegetable oil buyer may need to increase purchases in the coming months, which could support Malaysian palm oil prices. On average, India imported over 750 thousand mt of palm oil per month in the 2023/24 marketing year (MY), which ended in Oct-24, according to the Solvent Extractors' Association of India (SEA).
Indonesia’s palm oil market faces a potential supply glut following the government’s crackdown on illicit exports, which reduced demand from European energy and transport sectors. The policy shift has led to lower prices, with palm oil futures on the Bursa Malaysia Derivatives exchange dropping from USD 1,167/mt in Dec-24 to below USD 951.52/mt in Jan-25. Previously, Indonesian producers offloaded excess supplies to European companies using used cooking oil and palm oil waste products for biofuels. However, the export curb has increased the availability of virgin palm oil, raising concerns over oversupply and downward price pressure. The sudden surge in available palm oil has already impacted prices, and market players are now assessing the long-term implications of the policy shift.
Indonesia’s palm oil production is expected to increase by 2.2 million metric tons (mmt) in 2025, supported by better rainfall. Most of the output recovery will occur in the first half of 2025, influencing stocks and prices. Furthermore, Indonesia’s plan to raise its biodiesel blending mandate from B35 to B40 could tighten supply, as more palm oil will be diverted for domestic biofuel production. Industry experts at a recent event highlighted the challenges of forecasting palm oil prices, citing geopolitical uncertainties and potential trade tensions under the new United States (US) administration. The Agriculture Minister emphasized that tariffs and a possible trade war could be the main factor affecting palm oil prices in the near term.
Malaysia’s palm oil production is unlikely to recover for at least another month as heavy rains and flooding continue to disrupt harvesting and reduce fresh fruit bunch output, according to the Malaysian Palm Oil Board (MPOB) Director General. The adverse weather has tightened global supplies, contributing to a back-to-back stockpile drawdown and pushing futures up nearly 9% in Feb-25. With forecasters predicting more rainfall, supply constraints are expected to persist, particularly as buyers increase purchases ahead of a major Muslim festival.Short-term challenges include waterlogged farms and lower oil extraction rates, impacting production in Q1-25.
Johor has reinforced its position as a global leader in sustainable palm oil production with the launch of the Integrated Sustainable Palm Oil Complex (iSPOC), Malaysia’s first fully integrated facility for the palm oil industry. Developed by Johor Plantation Group Bhd, iSPOC brings the entire palm oil supply chain into a single sustainable ecosystem. The complex operates on a circular economy and zero-waste model, utilizing 100% renewable energy from biogas and biomass. The initiative aims to enhance environmental sustainability while strengthening Malaysia’s global palm oil market competitiveness.
Indonesian palm oil prices surged to USD 1.58 per kilogram (kg) in W9, marking a 12.06% week-on-week (WoW), 29.51% MoM, and 77.53% year-on-year (YoY) increase. This is due to lower production, strong domestic biodiesel demand, and rising export taxes. This sharp rise has made palm oil more expensive than other vegetable oils, turning it into a premium product and posing challenges to market competitiveness. High prices could push consumers toward alternative oils, as seen in India, where switching back to palm oil requires significant effort. Production declines also contribute to price pressures, with Dec-24 Crude Palm Oil (CPO) output falling 10.55% MoM to 3.876 mmt, while Palm Kernel Oil (PKO) production dropped to 361 thousand mt. Total 2024 production stood at 48.16 mmt for CPO and 4.6 mmt for PKO, reinforcing concerns over supply constraints.
Malaysian palm oil prices remained unchanged WoW but rose 3.85% MoM to USD 1.08/kg in W9, driven by concerns over pest attacks in key oil palm-producing states and ongoing recovery efforts from recent floods that disrupted production. The strengthening price trend is also supported by declining stock levels, with Reuters estimating Feb-25 stocks could hit a three-year low. Moreover, India, the world's largest palm oil importer, is expected to ramp up purchases from Mar-25, following unusually low imports in Jan-25 and Feb-25, further improving the demand outlook.
Thailand palm oil prices slightly declined 0.88% WoW to USD 1.12/kg in W9 from USD 1.13/kg in W8. The price drop was primarily driven by increased CPO production, with Thailand’s palm oil output reaching approximately 2.9 mmt in early 2025, up from 2.75 mmt in the same period in 2024. Furthermore, weaker export demand, particularly from key buyers like India and China, contributed to downward pressure on prices. The Thai government’s decision to maintain high biodiesel stockpiles also limited domestic palm oil consumption growth, further weighing on market prices.
With Indonesia facing a potential palm oil supply glut due to the crackdown on illicit exports, traders and exporters should capitalize on lower prices to strengthen trade relationships with key importers such as India, China, and the Middle East. Offering competitive pricing and flexible contract terms can help secure long-term buyers and offset losses from reduced European demand. Moreover, exporters can explore alternative markets in Africa and Latin America, where palm oil consumption is rising due to affordability compared to soybean and sunflower oil.
The Indonesian government’s plan to increase its biodiesel blending mandate from B35 to B40 presents an opportunity for producers to redirect excess palm oil towards biofuel production. Industry stakeholders should accelerate investment in biodiesel refining capacity and work with policymakers to ensure smooth implementation. In Malaysia, where weather disruptions are tightening supply, aligning biodiesel strategies with Indonesia’s policy could help stabilize domestic palm oil prices while reducing reliance on external markets.
As seen with Johor’s iSPOC, sustainability initiatives are becoming a key differentiator in the global palm oil trade. Indonesian and Malaysian producers should enhance their sustainability certification efforts (e.g., RSPO, MSPO, ISPO) to meet stricter environmental standards, particularly in the European and US markets. Investing in sustainable practices, such as waste-to-energy conversion and zero-deforestation policies, can improve market access and justify premium pricing for certified sustainable palm oil, mitigating price pressures from oversupply.
Sources: Tridge, Business Times, New Strait Times
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