Malaysia to retain palm oil market position despite EU–Indonesia trade agreement momentum

Malaysia is expected to maintain its competitive position in the global palm oil market despite accelerating progress in the Indonesia–EU trade agreement. While Indonesia, the world’s largest palm oil exporter, has concluded negotiations on a free trade agreement with the EU and is moving toward ratification, analysts say the competitive landscape remains more balanced than a simple first-mover advantage suggests.

Indonesia exported an estimated 23.6 mln tonnes of palm oil worth $24.4 bln in 2025, while Malaysia shipped 17.3 mln tonnes. However, Malaysia continues to hold a strong position in higher-value segments of the market, with total export earnings estimated at around $30 bln, reflecting its focus on refined and certified products.

A key factor shaping competition is compliance with the EU Deforestation Regulation (EUDR), where sustainability certification plays an increasingly important role alongside tariffs. Malaysia has already secured recognition of its Malaysian Sustainable Palm Oil (MSPO) certification in discussions with the EU, strengthening its regulatory standing regardless of the FTA timeline.

At the same time, Indonesia’s earlier progress in finalizing the trade agreement could improve its price competitiveness through potential tariff advantages. Currency dynamics may also play a role, with expectations of a stronger Malaysian ringgit and a relatively weaker Indonesian rupiah in 2026 influencing export pricing.

Despite these pressures, analysts believe Malaysia will retain a degree of competitive resilience, supported by its established sustainability framework and strong positioning in premium palm oil markets.

Tags: Indonesia, EU, Malaysia, palm oil