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With a History dating back 5000 years, palm oil has come to be
the most consumed, produced and trade type of vegetable around the
world. It is regarded as an inexpensive value choice for vegetable
oil food use and has wide applications to various downstream
industries such as cosmetics products production.
Today, Southeast Asia countries, predominantly Indonesia and
Malaysia the largest supplying region; while the consuming markets
are widespread around the world by all major economies, both
developing and developed countries, so it might come as a surprise
to find out that palm oil originated in West Africa before and was
only introduced into Malaysia about a century ago.
With trade data we may track the global view of where and how
much palm oil are flow in and out, even down to specific locations
and understand the traffic volume. Palm oil usually could be
transported via container or bulk carriers - which means carriers
in both markets shall have the catchment of this commodity
cargo.
Trade Overview
According to Global Trade Atlas (GTA) data reported by
individual reporters, in 2019, global palm oil (HS 1511) export
exceed 50 million tonnes; exports are largely dominated by the
southeast Asia region with Indonesia and Malaysia as the top
exporters - together contributed around 44 million tonnes. On the
demand side, while palm oil largest consuming markets are held by
India and China, with 9.7 million and 7.6 million tonnes imported
respectively. It is also largely imported into America and
Europe.
The strong export and trade to some extent reflected the
production and demand of palm oil in that year, when global palm
oil production in 2018/19 grew and exceeded 74 million metric tons
in large part assisted by a neutral El Niño-Southern Oscillation
(ENSO) index. The amply supplied palm oil market lent itself to
more competitive pricing in that year, keeping food and industrial
uses of palm oil to expand. (Source: IHS Markit Agriculture
Industry Analysis, Nov 2020)
With GTA's statistics detailed commodity level, we may observe
more granular to see the movements of supply and demand in addition
to global mega trends. While palm oil remains an important
commodity in our daily life as well industry production, the trade
of HS1511 i.e. raw palm oil, shows a sign of decrease in terms of
trade value. At the same time, Indonesia and Malaysia remains the
dominate supply. This reflects the fact that globally the majority
of palm oil plantations are in Indonesia and Malaysia. Yet
countries in the America, i.e Guatemala and Colombia are emerging
as exporting markets while European major exporters (Netherlands
and Germany, who at the same time re-export palm oil after
processing, more details by looking at breakdown HS levels) have
seen slower growth.
On the demand side, imports are more evenly distributed
comparing to exports. Interestingly if comparing to export markets,
Netherlands and Malaysia are also exporting palm oil (HS 1511)
which leads the question, that these countries are actually forming
a 'processing hub' of palm oil value chain.
Figure 5: Top Palm Oil Importers in the last Decade
Figure 6: Top Importers Share in 2019
Observation by Region
We could further zoom into key geographic markets for a deeper
analysis from regional and sector perspectives. Nevertheless, the
price and the structure of palm oil trade still varied by region.
Also new markets are emerging as sources for example South America
and Africa. We may observe from trade statistics of the crude and
refined trade which may reflects a local palm oil processing
industry, re-export and therefore wider implication on value chain.
In this regard and considering that the variety of application palm
oil has, further analysis could be derived to uncover the
mid-product and end-product sectors.
Asia: Dominant supply and demand boost regional
trade
India remained as the top importers in Asia for palm oil in the
past decade, except in 2019 when China experienced a significant
increase in imports - possibly as some news speculated as a
substitute of oil source to soy beans due to trade conflict with
the US. On the supply side, Indonesia and Malaysia are competing in
the market share of palm oil exports, with the current leading
position taken over by Indonesia in recent years except 2016 when
factors from El Nino and Indonesia Domestic consumption
twinned.
Figure 7: Key Importers and Exporters in Asia
Europe: Palm Oil Processing Focused
In Europe, the Netherlands tops both the exporter and importer
billboard. Yet the imports appears to be more diverse. When looking
at trade of those largest participants at a more granular level
(i.e. HS 6), we may capture different trade patterns, or further
the potential economic implications to that nation. For example,
countries such as Netherlands and Germany import a lot crude oil
but also heavily export refined products - which may imply a
processing value within the market.
Within America, there has been an increase in palm oil trade
from Colombia, Ecuador and Guatemala. It's worth noticing that
Guatemala emerged in recent years as a large exporting country of
palm oil - which has also been captured in Figure 4 above.
In a highly concentrated supply market that's driven by only a
few exporters palm oil apparently is one of the pillar industries
in the top players, predominantly Indonesia and Malaysia's
economies and trade. Take the No.1 exporter, Indonesia, for
example, with GTA Extra Data Fields we may breakdown its export by
province to look at where crude and refined products are shipping
out respectively.
Palm oil brings significant maritime traffic demand on various
trade routes. While the majority of trade from Indonesia is
intra-Asia, With GTA's unit measure conversion, the estimated TEU
volume in 2019 heading for China and India amount to 349K and 308K
TEUs while North America (US) would generate about 68K TEU marine
traffic. Top exporting location in Indonesia is Dumai - with an
annual volume equivalent to circa 1.61 million TEUs.
Figure 10: Palm Oil Trade Partners Indonesia Exports
Looking at the origin provinces in Indonesia that export palm
oil at the breakdown level for crude and refined palm oil
respectively. Riau province tops both crude and refined palm oil in
terms of export volume in 2019; while Sumatera Barat, though only
ranked third, but had a much narrower gap between the two types of
commodities.
Pricing is another important factor that to an extent links to
regional output. It is also important for those who provide
agri-related trade finance firms to understand the reasonable price
of the commodity in the year. For corporate ethical procurement
team, this may also be alternative information for evaluating the
'sustainability' potential of that exporting origin.
Movements in Palm Oil Trade
Beyond trade itself, now palm oil is not only a commodity that's
driving price dialogues, but also on thesustainability agenda.
Using actual trade data and the unit price movements, could help
generate a view of how particular commodity related ESG initiatives
are carried out.
Despite that palm oil is an important source for downstream
industries and consumer products, palm oil production is a source
of growth and employment but also faces challenges concerning
deforestation, biodiversity loss, greenhouse gas emissions, and
water management. The EU has voted to phase out the use of palm oil
as biodiesel, and the sustainability initiatives from RSPO also
expanding. ESG compliance is also driving palm oil trade. GTA
Forecasting with macro-factors built into model provide a long-term
outlook for trade and transport. With the result we may say palm
oil trade will still grow but at a moderate rate, with South and
Central America gradually building up its position in the total
supply market.
Figure 13: EU Import Development
Figure 14: Palm Oil Trade Forecast - Traffic and Routes
As an economic agriculture product and a widely applicable
consumption necessity, palm oil plantations and trade bring
profitable businesses that benefit local economies, while brought
transport demand. Along the value chain, downstream processing
industry may further stimulate local developments. Yet its output
is largely impacted by climate, while negative impact from over
plantation could offset some of the pure benefits under the
sustainable development agenda goals. With these various dynamic
factors, public and private stakeholders will need to closely
follow the movements of the supply chain, one way is to get insight
by following the movements of trade.
Government / Trade Department: To check the
trade volume against the number of issued 'certification' required
for sustainable
Corporates Procurement and Traders: Follow
supply and demand dynamics and specific locations; procure
sustainable palm oil to support ESG programme; find alternative
markets of supply for business contingency planning; total cost
comparison between different markets. (e.g. food manufacturing,
cosmetics, other consumer products)
Freight Providers and Landside logistics:
Estimate the volume of traffic demand and what trade routes to
focus; capital investment (specialised warehouse, forklift, lorries
etc.)
Finance: Understand commodity price when
evaluation and granting trade finance solutions to specific
regional traders.
3rd party ESG auditors: As ESG indicator
emerge a metric to evaluate corporate performance, trade data could
be used as an alternative resource to verify against the claim
sustainable production.
