The edible oil trade in the European Union (EU) is significantly influenced by macroeconomic factors, including regulatory changes and market forces of supply and demand. The EU is a net importer of oils and fats, and in 2023, almost 25% of its total consumption of oils and fats was met through imports. Over the past three years, the EU has been gradually reducing its dependency on imports by expanding local rapeseed production. This shift has led to a decrease in the overall importation of edible oils, including palm oil.
Recent data from Oil World highlights that the EU imported 4.2 million MT of the four major oils from January to May 2024, marking a 5.6% increase compared to the same period in the previous year. Notably, sunflower oil imports surged by 71%, driven by a consistent supply from the previous planting season, particularly from Ukraine.
(‘000 MT) |
Jan-May 2024 |
Jan-May 2023 |
Change (MT) |
Change (%) |
Palm Oil |
2,212 |
2,743 |
(531) |
(19.36) |
Sunflower Oil |
1,565 |
917 |
648 |
70.67 |
Rapeseed Oil |
201 |
125 |
76 |
60.80 |
Soybean Oil |
224 |
195 |
29 |
14.87 |
Total |
4,202 |
3,980 |
222 |
5.58 |
Table 1: Imports of four major edible oils in the EU-27 Jan-May 2024 (Source: Oil World)
If we review the edible oil trade data for the first five months of 2024, we notice that the EU imported a total of 2.2 million metric tons (MT) of palm oil, marking a 19% year-on-year decrease. A significant decline was observed in imports of Indonesian palm oil, which fell to 1.2 million MT from January to May 2024, compared to 1.5 million MT during the same period in 2023. Similarly, imports of Latin American palm oil into the EU-27 decreased to 260,000 MT from 388,000 MT in 2023. In contrast, Malaysian palm oil exports to the EU showed a different trend.
Figure 1: Jan-June Malaysian Palm Oil Cumulative Imports by the EU27 2016 – 2024 (MT) – (Source: MPOB)
According to MPOB figures, the EU imported a total of 646,819 MT of palm oil from Malaysia within the first half of 2024, an increase of 22% as compared the same period of the previous year which recorded a figure of 530,051 MT. This can be considered an unusual, as the only period post RED II enforcement where Jan-June figure recorded a Y-o-Y increase was in 2022, when the Russia-Ukraine conflict erupted and the Domestic Market Obligation (DMO) was imposed on Indonesian palm oil exports created a global supply uncertainties of edible oils. So what could have contributed to the increase in Malaysian palm oil into the EU in the first half of 2024? There are two key reasons for this increase in imports:
1. Global Palm Oil Production
Global palm oil production in the first quarter of 2024 was one of the factors in the increase of Malaysian palm oil imports by the EU. During the first three months of the year, Oil World reported a decline in production in Indonesia, coupled with rising domestic demand for food and biofuels. This led to a significant decrease in Indonesian palm oil exports, with exports to the EU from January to May dropping by 325,000 metric tons (MT). Additionally, reduced exports from Central and South American countries, mainly to the EU market, were reported due to decreased production in Guatemala, Colombia, and Honduras. In contrast, crude palm oil (CPO) production in Malaysia from January to March 2024 saw a positive trend, with production reaching 4 million MT, an increase of 3.25% compared to the same period the previous year, according to MPOB data. This upward trend continued in April through June 2024, with production totaling 8.9 million MT compared to 8.1 million MT in the same period the previous year. These global palm oil production dynamics contributed to Malaysia being the preferred palm oil source in the EU and globally during the first half of 2024.
2. Stock Accumulation
In anticipation of the upcoming EU Deforestation Regulation (EUDR), EU importers are reported to be stocking up on palm oil within the region, in line with the upcoming enforcement date of 30 December 2024. Within the framework of EUDR, EU operators or importers of palm oil, importing products which are covered under annex I of the regulation would be subjected to due diligence requirements by 30 December 2024, stating that the imported products are free from deforestation. As such, within the timeframe before the enforcement, importers are taking advantage of this period to maximize its imports of palm oil.
EU-27 Outlook for Malaysian Palm Oil in the Second Half 2024
The first six months of 2024 showed a very promising trend for Malaysian palm oil exports to the EU. However, implementation of EUDR especially in terms of due diligence requirement as well as country risk assessment remains ambiguous as of writing. It is foreseeable that this lack of clarity in implementation would lead to reluctance by importers in the region to import more palm oil moving closer to the enforcement date of 30 December 2024. On another note, the EU and Ukraine’s rapeseed and sunflower seed yields for 2024/2025 are expected to fall significantly below expectations due to adverse weather conditions. The ambiguity surrounding the implementation of the EUDR could hamper palm oil demand in the EU to some extent. However, given the anticipated decline in sunflower seed and rapeseed supply for the 2024/2025 season, Malaysian palm oil is expected to remain competitive in the EU market for the second half of 2024.
Prepared by Fazari Radzi
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