Malaysia peddles premium palm oil in China as overall imports decline

In China, Ezzaruddin said, “they have their own set of oil, so that is the thing, but for us palm oil is very versatile, so we can (satisfy) the demand”.

“So, a lot of things that we need to streamline, because it might be the culture, the use of the oil, or it might still be new for the market,” said Ezzaruddin, head of the Carey Island plantation’s business unit.

China imported 1.76 million tonnes of Malaysian palm oil in 2022, representing 11.2 per cent of Malaysia’s exports of the commodity, but that fell to 1.47 million tonnes (9.7 per cent) in 2023 and 1.39 million tonnes (8.2 per cent) last year, according to the Malaysian Palm Oil Board, a government agency.

Once the top importer of Malaysian palm oil, China has now been replaced by India.

Chinese consumers now have enough money to demand foods made with oils that are considered to be healthier, said Khor Yu Lung, a political economist at Singapore-based Segi Enam Advisors. Much of it can be refined domestically, she added.

Rapeseed oil is common now and may be sourced from China, she said, while much of the vast amounts of soybean China imports each year goes to making oil.

“There is still a middle-income trap for palm oil because there’s a perception that it’s not as healthy,” she said. Specialty, health-focused palm oil is a “niche” industry now, she added, but it is morphing into a new norm.

“There’s been talk that there’s more demand for value-added products,” Khor said. “Everyone’s trying to produce some now.”

The experience centre’s gift shop and mini-museum are surrounded by row after row of squat palms that bear date-sized kernels. The kernels contain oil that gets shipped abroad for use in cooking or processing food.

Sime Darby, which grows oil palms on more than 300,000 hectares (741,000 acres) of land in 13 countries – mostly in Southeast Asia – has a trading office in China. It is not the only producer keen to make the most of the Chinese market.

Business leaders throughout Malaysia’s palm sector are changing production formulas and launching marketing efforts in a bid to reclaim the China market.

“Some people might have that old mindset that palm oil is not healthy so (we’re) creating awareness of nutritional benefits,” said Faisal Iqbal, general manager of the marketing and market development office at the Malaysian Palm Oil Council, an industry promotion organisation.

The fate of palm oil matters all the more to Malaysia because palm farming is on the decline around the nation of 34.1 million people due to environmental pressures, urbanisation, the need for replanting and export competition from neighbouring Indonesia, a much bigger producer.

To help shore up the industry, Malaysia secured more than RM230 million (US$51.8 million) worth of palm oil trade deals in July when the country’s deputy plantation and commodities minister, Chan Foong Hin, visited China.

They included an e-commerce deal to help sell palm oil as health products in China, Bernama, Malaysia’s national news agency, reported, while another deal targeted the expansion of vitamin-rich red palm oil use in Chinese animal feed.

Another aimed to expand Malaysian refinery Able Perfect’s Chinese “presence” in refined palm oil and palm shortening to about RM200 million, Bernama quoted the deputy minister saying.

“This looks better than past MOUs, since [it’s] apparently specific on new and value-added products,” Khor said.

Iqbal’s council is talking separately to nutrition associations in the Chinese city of Xiamen, where they have personal connections, about improving residents’ awareness of palm oil’s health and nutrition attributes. The Xiamen effort is one of many the council has set up in China.

China’s inland markets, beyond the relatively affluent coastal cities, present another new selling opportunity, Iqbal said.

Some exporters are marketing red palm oil for its health benefits, Iqbal said. It has so many vitamins, antioxidants and other nutrients that some people drink it directly every day.

“There are actually recommendations that people … consume one teaspoon or tablespoon a day, just drink it,” he said.

In another boost to Malaysian exporters, in 2023 China approved the use of tocotrienols, vitamin E compounds made from palm oil. And some exporters are pushing palm carotenoids, an antioxidant that may sell as a soft gel health supplement.

China’s health supplements market has been growing rapidly on “increased health awareness” since the Covid-19 pandemic, the consultancy Dezan Shira and Associates said in a research note. A market worth US$45.5 billion in 2023 is projected to reach US$58.2 billion by 2027, according to iiMedia Research.

Expect more experimentation ahead, Iqbal said.

“Palm oil can be customised, seriously,” he said. “There are so many formulations customised for the users’ advantages and these larger corporations can do that.”