KUALA LUMPUR: Palm oil demand in December 2024 is projected to remain stable as importers prepare for Indonesia's B40 biodiesel mandate, set to take effect in January 2025, and a potential revision of the country's palm oil export levy structure.
According to the Malaysian Palm Oil Council (MPOC), Malaysia's palm oil production has been on a downward trend since September, following robust growth in the first eight months of 2024.
In November, exports dropped by 14.7 per cent to 1.48 million tonnes. Nevertheless, year-to-date exports from January to November rose by 12.8 per cent (1.66 million tonnes), with total exports for 2024 expected to reach 16.8 million tonnes.
In value terms, palm oil and palm-based product exports generated RM99.3 billion in the first 11 months of 2024, reflecting a RM12.5 billion increase compared to the same period in 2023.
Despite heavy rains and flash floods in late November that disrupted harvesting and production in Malaysia and Indonesia's Kalimantan region, November exports increased by 5.7 per cent, achieving the second-highest volume for November since 2018. However, with the monsoon season likely to persist into December, MPOC anticipates further declines in Malaysia's palm oil output, with year-end inventories projected to drop to 1.8 million tonnes—a 21 per cent decrease compared to the 2.29 million tonnes recorded in December 2023.
Meanwhile, MPOC said US soybean oil prices have fallen to their lowest levels since 2020, making it the most affordable vegetable oil globally.
It said this price shift is largely driven by unclear biofuel policy under the Trump administration coupled with a bumper global soybean production for the current season.
"The weak soybean oil prices in the US are expected to reverse rapidly once US biofuel policy is clarified, prompting biofuel producers to resume their purchases and driving up soybean oil prices," it said.
With China removing the 13 per cent tax rebate on used cooking oil (UCO) exports starting December 1, 2024, MPOC said the UCO imports to the US have become more costly.
The US imported 1.07 million tonnes of UCO from China between January and October 2024, which accounted for 34 per cent of UCO feedstocks used in biodiesel production.
As a result, the council said soybean oil usage in the US biofuel industry is anticipated to grow steadily in coming months.
"In December, the anticipated recovery of soybean oil prices is likely to provide continued support for palm oil prices, keeping them above RM4,800.
"However, the extent of this price rally will hinge on supply conditions in Malaysia and Indonesia, particularly if severe monsoons persist throughout December, further disrupting production.
"Additionally, subdued energy prices will act as a limiting factor for palm oil price rally, as palm oil remains US$400 per tonne more expensive than gas oil, necessitating substantial government subsidies to make palm oil viable for biodiesel blending," it added.