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Trade4go
Apr 11th, 2025
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Between Jul-24 and early Mar-25, European Union (EU) palm oil imports fell sharply to just under 1.9 million metric tons (mmt), down from 2.4 mmt during the same period in 2023/24, according to European Commission (EC) data reported by the Union for the Promotion of Oil and Protein Plants (UFOP). Indonesia and Malaysia, the two largest suppliers globally, saw year-on-year (YoY) declines of 23% and 30%, respectively. Shipments from Guatemala dropped 37%. Papua New Guinea was the only supplier to register a slight increase. The overall decline is due to the phase-out of EU Renewable Energy Directive (RED II) provisions, which had allowed palm oil-based biofuels to be credited until 2030.
The Colombian Ministry of Agriculture and Rural Development (MAGRD) reported that Colombian palm oil exports saw significant growth in Feb-25. Palm oil exports increased by 31.3% YoY, reaching USD 43.3 million, contributing to the overall strong performance of agricultural exports. Despite a 0.8% decline in total exports, mainly due to a drop in fuel and extractive product sales, the agriculture sector continued to thrive, with food-related exports growing by 29.5% in the first two months of 2025. MAGRD attributed these results to government strategies aimed at creating a more sustainable, resilient economy, shifting away from resource extraction.
India's palm oil imports rose by 13.2% month-on-month (MoM) to 423,000 metric tons (mt) in Mar-25 but remained below normal levels for the fourth consecutive month, as palm oil’s sustained premium over soybean oil led refiners to favor alternative oils. Soybean oil imports surged 24% to 352,000 mt, while sunflower oil imports dropped 15.5% to a six-month low. The continued weakness in palm oil demand from India, the world’s largest vegetable oil buyer, may pressure Malaysian palm oil prices and support United States (US) soybean oil futures. Imports are expected to remain below average in Apr-25 but may rise from May-25, with a notable recovery anticipated by July as palm oil regains price competitiveness.
Indonesia's crude and refined palm oil exports rose 62.2% MoM in Feb-25 to 2.06 mmt, reaching their highest level since Oct-24. This sharp increase was driven by the government’s decision to reduce export duties, which enhanced the competitiveness of Indonesian palm oil in global markets. On a yearly basis, exports also grew significantly, rising 45.1% compared to Feb-24. The price advantage has shifted demand from Malaysia, whose Feb-25 palm oil exports fell 16.3% MoM to a four-year low of 1 mmt. The surge in Indonesian exports is helping reduce inventories and support palm oil prices, which remain above soybean oil. As of March 31, 2025, refined, bleached, and deodorized (RBD) palm oil was priced at USD 1,290.67/mt, compared USD 1,216.17/mt for the European Union (EU) soybean oil free-on-board (FOB) and USD 1,098.02/mt for Daylian soybean oil.
Malaysia's palm oil prices rose to USD 1.08 per kilogram (kg) in W14, marking a 2.86% week-on-week (WoW) increase and a 14.89% YoY rise. Several factors suggest potential volatility in the short term, particularly in early to mid-April. In the weeks ahead, global price movements may remain sensitive to shifts in crude oil prices and competing vegetable oils. However, from late April into May, a recovery in production and increased demand from key markets like India are expected to contribute to price stabilization. However, global supply and demand dynamics, including lower soybean oil prices, could limit significant price gains.
The impact of US tariffs on Malaysian palm oil, which will rise to 24% starting April 9, is expected to be minimal due to the small share of US imports. Nonetheless, Malaysia could gain market share in the US over Indonesia due to the tariff differential, with Malaysia's 24% tariff and Indonesia's 32% tariff. Crude oil price fluctuations, linked to biodiesel demand, also pose a risk to palm oil prices, with lower crude oil prices potentially exerting downward pressure. Despite these challenges, Malaysia's palm oil sector is expected to benefit from domestic consumption increases during festive seasons and stable supply recovery.
Thailand's palm oil prices increased by 2.70% WoW and 15.15% YoY, reaching USD 1.14/kg in W14. Despite higher crude palm oil (CPO) production, which reached 2.9 mmt in early 2025, compared to 2.75 mmt in early 2024. Increased domestic production has bolstered supply. However, weaker export demand from key markets such as India and China, alongside government policies to maintain high biodiesel stockpiles, has limited consumption growth.
While rising production supports the supply side, subdued export demand and ongoing biodiesel stockpiling could apply downward pressure, potentially stabilizing or softening prices in the medium term. Consequently, while current prices show growth, the balance between supply and dampened demand suggests a potential for price stabilization or moderation moving forward.
To mitigate the impact of the EU's reduced palm oil imports due to the phase-out of RED II provisions, producers in Indonesia, Malaysia, and Guatemala should seek to expand trade partnerships in emerging markets such as Africa, South Asia, and Latin America. Targeted efforts to increase market share in these regions through competitive pricing and tailored marketing will help offset the declines in traditional European demand.
Given the pressure on Malaysian palm oil prices from competing oils, producers should focus on improving cost efficiency through enhanced production techniques, reduced export duties, and efficient logistics. This will help make Malaysian palm oil more competitive in markets like India and the US, potentially boosting market share despite higher tariff rates.
Sources: Tridge, UkrAgroConsult, The Edge Malaysia
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