Palm oil prices fell 1.7% amid reduced exports and demand for biodiesel

A 10% drop in oil prices in December to a 6-month low has put upward pressure on palm oil demand prices from the biodiesel industry, so prospects for stronger demand next year remain in doubt.

February palm oil futures on Bursa Malaysia fell 1.7% to 3,670 ringgit/t, or $780/t, yesterday, having lost 6.1% since early December under pressure from shrinking exports, despite lower inventories.

According to surveyors, for December 1-10, Malaysia reduced the export of palm oil products by 4.1-7.4% compared to the same period in November. Palm oil stocks in Malaysia fell for the first time in seven months in November as production fell more than exports, the Malaysian Palm Oil Board (PMOB) said.

The Council of Palm Oil Producing Countries (CPOC) believes that 2024 will be a critical year for the industry due to EU plans to introduce a new EUDR and other legislation. SRORS notes that EU countries do not consider palm oil a bad product, but only protect their own oils. “Europe subsidizes canola, canola and soy and they cannot compete with palm oil. Therefore, the only way to protect the market is to create obstacles for the import of palm oil," says the SRORS. But the organization hopes that reduced production, unfavorable weather and the need for biofuels will support palm oil prices at the level of $800-1,000/t.

In 2023, the Indonesian government introduced a B35 biofuel mandate, so 43% of palm oil was used for biodiesel production, which significantly changed export volumes. If during the last 5 years the share of Indonesian palm oil in the EU market was 15.7%, now it has decreased to 10-11%. Indonesia will join the B40 next year, so domestic demand for palm oil will remain stable, as will markets in India, China and Pakistan, while demand in Europe will continue to decline.

In general, the demand for biofuels will decrease against the background of increased production and sales of electric vehicles. In 2023, more than 5.8 million electric cars and plug-in hybrids will be registered in the world, the share of which in the total volume of cars sold will reach 15%.