Malaysia’s palm oil exports surge as sustainability, competition arise

The recent 36th Palm & Lauric Oils Price Outlook Conference & Exhibition (POC 2025) drew over 2,000 participants from more than 50 countries to discuss the edible oils market. 

Hosted by Bursa Malaysia Derivatives Bhd, the event has become a crucial platform for industry players, analysts and policymakers to exchange insights on global trade policies, price volatility and sustainability challenges facing the palm oil sector. 

Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani highlighted the strong performance of the country’s palm oil industry in 2024. 

“Crude palm oil (CPO) prices increased by 9.7%, averaging RM4,179.50 per tonne, with a peak of RM5,119.50 per tonne in December,” he said in his opening speech. 

This growth was driven by higher demand from developing regions such as Africa and South and Central Asia, as well as Indonesia’s biodiesel mandate, which now diverts 25% of the nation’s 48 million-tonne CPO output into biofuel production. 

Johari noted that palm oil prices have remained higher than those of other major vegetable oils, reinforcing Malaysia’s key role in the global market. 

A major topic at the conference was the European Union’s (EU) decision to postpone the enforcement of the EU Deforestation Regulation (EUDR) to Dec 30, 2025. 

While the delay provides plantation operators and smallholders with more time to meet the regulation’s stringent due diligence requirements, Johari reaffirmed Malaysia’s commitment to supplying sustainable and high-quality palm oil. 

“Large estates, which account for approximately 73% of Malaysia’s planted palm oil area, are well-positioned to comply with sustainability standards,” he added. 

The government, he added, has been actively engaging with international policy-makers to ensure fair treatment for Malaysian palm oil in global markets. 

Johari’s recent official visits to Europe included discussions with the co-chair of the 

Forest, Agriculture and Commodity Trade Dialogue in London and the EU commissioner overseeing the EUDR in Brussels. 

He also addressed Malaysia’s record growth in palm oil exports, which rose by 12% in 2024 to US$26 billion (RM114.4 billion), up from US$22 billion in 2023. 

He announced that CPO production increased to 19.3 million tonnes, the highest level in six years. 

However, Johari cautioned that long-term sustainability remains a challenge, particularly with the declining rate of replanting. 

“In 2024, replanting efforts fell to 114,000ha from 132,000ha in 2023, well below the recommended 285,000ha needed annually,” he warned. 

The government is ramping up financial assistance and tax incentives to encourage growers to replant with high-quality seedlings, ensuring continued productivity without expanding land use. 

Technological advancements were another focus, with Johari advocating for the adoption of artificial intelligence (AI) in palm oil mills to improve efficiency, reduce costs and minimise labour dependence. 

He estimated that AI-driven predictive tools could generate savings of up to US$600,000 annually for ageing mills. 

The government is also working on integrating palm oil-based renewable energy (RE) into the national grid, with plans for all mills and refineries to operate on sustainable power within the next decade. 

Johari emphasised Malaysia’s commitment to environmental, social and governance (ESG) principles, reiterating that sustainability is no longer an option but a necessity. 

“Companies failing to implement sustainable practices risk losing access to global markets,” he said. 

The Malaysian Sustainable Palm Oil (MSPO) certification scheme has gained international recognition, with the enhanced MSPO 2.0 standard incorporating additional sustainability measures such as high conservation value assessments and a greenhouse gas calculator.

To assist smallholders in meeting the EUDR requirements, the government is conducting nationwide training sessions and providing financial support to cover MSPO certification costs. 

Closing his speech, Johari said Malaysia must lead the way in sustainable palm oil production through bold and decisive actions. 

He urged industry players to integrate ESG principles into their core operations, ensuring that Malaysia remains a top producer of responsibly sourced palm oil. 

Palm oil stands at a critical juncture, balancing its role as a key player in the global edible oils and biodiesel markets while navigating shifting regulatory landscapes and the rise of low-carbon-intensity feedstocks. 

As competing oils such as soybean, sunflower and rapeseed gain traction, the divergence in biofuel policies between Malaysia and Indonesia raises concerns over long-term market share and competitiveness. 

Indonesia has aggressively pushed forward with a B40 biodiesel mandate, whereas Malaysia remains at B10 for transport and B7 for industry. 

According to the Malaysian Biodiesel Association (MBA) president UR Unnithan, this policy difference presents a competitive challenge for Malaysia’s biodiesel sector. 

“Malaysia has an installed biodiesel capacity of about 2.4 million tonnes — much lower than Indonesia’s 17 million tonnes. 

“Currently, we utilise about 55% of our capacity for domestic use under the existing mandate and export a limited 250,000 tonnes,” he said. 

Unlike Indonesia, Malaysia does not have a large domestic diesel consumption market. Indonesia’s high reliance on diesel imports makes its biodiesel programme economically viable, creating a self-sustaining ecosystem that boosts local commodity prices and industry development. 

Malaysia, however, remains heavily export-oriented, shipping out nearly 85% to 90% of its palm oil production. 

“From that perspective, the two markets are very different, Indonesia’s policy framework suits them because they have a huge domestic market and significant diesel consumption,” he said. 

Unnithan added that the global landscape for biofuels is shifting, with key palm oil-producing nations such as Brazil, Argentina, Colombia, Thailand and the US implementing national biofuel mandates. 

Without policy adjustments, Malaysia risks losing its competitive edge in the biodiesel market. The push for greater biodiesel adoption also aligns with Malaysia’s broader environmental commitments, including efforts to reduce greenhouse gas emissions in line with the UN Climate Change Conference (COP21) agreement. 

Unnithan also highlighted the industry’s ability to utilise waste products for biodiesel production. 

Meanwhile, FGV Holdings Group CEO Fakhrunniam Othman acknowledged the challenges but noted that Indonesia’s policy does not directly impact Malaysia’s biodiesel industry. 

“I do not see the two as one impacting the other. But definitely, biodiesel traction in Indonesia is benefitting them because they import a lot of fossil fuels. So that one is improving in terms of balance of trade,” he said. 

He also pointed out that Indonesia’s higher domestic biodiesel consumption constraints export availability, leading to price shifts in the export market.

“For Malaysia, we also believe biodiesel is the way to go, but we are really doing it based on economics whenever it benefits the consumer.

“But at this point of time, biodiesel in Malaysia is still incentive-driven. So, it is really the government’s call,” he added. 

Malaysia currently does not have voluntary biodiesel blending because it is not economically viable without government incentives. 

He said if one day the government decides to increase the incentive, it would be a positive effort going forward because fossil fuels could be replaced by RE. 

At present, Malaysia is progressing from B7 to B10, with the government working to expand the adoption of biodiesel. However, economic constraints remain a challenge. 

“The constraint is, if the economy is not there — it has to be funded by the government, as is the case in Malaysia. 

“Despite these limitations, industry leaders remain optimistic that increasing biodiesel adoption will contribute to long-term sustainability and energy security,” Fakhrunniam added. 

The transition to higher biodiesel blends offers economic and social benefits, particularly in securing energy independence. Recent geopolitical crises, such as the Russia-Ukraine war, have stressed the importance of fuel self-sufficiency. 

Countries that can produce their own fuel from local crops are in a stronger position to navigate global energy uncertainties. 

With the increasing preference for low carbon intensity feedstocks such as used cooking oil in the EU and US, Unnithan acknowledged that Malaysia’s palm-based biodiesel must remain competitive in global markets. 

Moreover, with the EU’s anti-deforestation law coming into effect this year, he sees an opportunity for Malaysia. 

“I personally see it as a good opportunity because today, biodiesel and biofuel imports are controlled by the Renewable Energy Directive. The new legislation is the regulation on deforestation-free products, EUDR, which we find conflicting,” he added. 

Unnithan pointed to a recent World Trade Organisation case verdict involving Indonesia, where the EU had blocked palm-based biofuels. 

“If we can get palm-based biofuels to comply with EUDR using technologies like the best blockchain platform, we can easily get the palm biodiesel industry to conform. 

“It becomes a conduit for us to increase exports more competitively. And this is what the governments of Indonesia and Malaysia need to do — engage with the EU and say we cannot have double standards: One legislation for biofuel and another for food and oil,” he added. 

Beyond energy security, increasing biodiesel consumption reduces foreign-exchange outflows from diesel imports and stabilises palm oil prices, benefitting smallholders. 

Unnithan said by using more, consumers support the palm price and help smallholders. He added that the palm biodiesel story makes good economic and social sense and to that extent, MBA is supportive.

Unnithan said with Malaysia at a crossroads, industry leaders are urging policymakers to take decisive action to maintain palm oil’s competitiveness in the global market. 

Without swift intervention, the country risks ceding ground to other nations prioritising RE and biofuel integration. 

“The future of Malaysia’s palm oil industry hinges on our ability to adapt to global trends and reinforce our position as a leader in sustainable biodiesel production,” he said. 

Another aspect shaping the industry is technology. The integration of digital tools, including blockchain platforms such as DiBiz Tech, is helping to improve efficiency, transparency and yield monitoring. 

Unnithan also said by using technology, MBA was able to bring smallholders on board with data coming in daily every time they harvest. 

He noted that the government should maintain sharp focus on every single smallholder by intervening and providing necessary support, not only when a smallholder produces very low yields. 

Traditionally, industry reports on smallholder yields come at the end of the year, limiting the potential for immediate action. However, with daily data, intervention can occur in real time, ensuring that struggling smallholders receive the necessary support, whether through replanting assistance, improved fertilisers, or access to better agricultural practices. 

“A blockchain platform like ours helps companies and governments to start focusing on real-time data. Instead of waiting for yearly reports, you can act immediately,” Unnithan added. 

Palm oil production in 2025 is expected to improve, but the market remains challenging as the commodity competes for market share amid shifting global trade dynamics. 

Godrej International Ltd director Dorab Mistry noted that Indonesia’s palm oil production could rise by at least two million tonnes, if not more. This could place pressure on Malaysia’s palm oil sector, which must navigate increased competition from its largest rival. 

With Indonesia addressing fraud issues related to waste oils and used cooking oil, its exports are expected to be more competitive, forcing Malaysia to differentiate itself. 

At the same time, palm oil supplies were expected to remain tight during the Ramadhan period and market behaviour among farmers. 

Mistry advised stakeholders to be prepared for volatility, particularly in balancing stock levels to manage pricing pressure. 

One of the critical developments affecting vegetable oil markets is the geopolitical and economic uncertainty surrounding the US. 

Mistry pointed to the impact of the US Trump administration’s return, calling it a “long, dark shadow” over vegetable oils and grains. 

For Malaysia, this could mean added challenges in maintaining palm oil’s pricing advantage, especially if sunflower oil rebounds in global markets.

Sustainability concerns also remain a critical factor, with the EU tightening deforestation regulations. Malaysian palm oil exporters may need to further adapt to ensure continued access to the EU market. 

In China, economic growth is picking up, but vegetable oil consumption is expected to remain flat. 

Mistry highlighted the possibility of trade conflicts between China and the US, which could impact soybean imports. 

“China may retaliate against US beans as a standoff on tariffs,” he said, adding that the country would likely focus on trade and tariff matters in 2025 rather than boosting vegetable oil consumption. 

This dynamic presents an opportunity for Malaysia to solidify its trade relationship with China as a reliable palm oil supplier. 

India, on the other hand, is expected to import more vegetable oils in 2025 than in the previous year. However, rumours of an increase in import duties have raised concerns about inflation. 

“Hiking import duty is an easy option and I am afraid governments tend to take the easy option,” Mistry added. 

Instead, he urged India to consider long-term solutions, such as increasing oilseed yields, incentivising crushers and encouraging meal exports. 

For Malaysia, India remains one of the largest buyers of palm oil. Any potential duty hike could impact Malaysian exports, forcing producers to seek alternative buyers or adjust pricing strategies. 

He warned that raising import duties on vegetable oils would lead to inflation, calling it a potentially “disastrous” move for India’s domestic economy. 

The global vegetable oil market faces a turbulent year ahead, with geopolitical tensions, policy changes and market shifts creating uncertainty. 

While palm oil production is set to improve, its battle for market share will be tough amid changing trade flows and policy decisions in key consuming and producing regions. 

Malaysia’s palm oil industry must be strategic in navigating these challenges, ensuring sustainability compliance, market adaptability and pricing competitiveness.

Tags: prices, Crude palm oil, Production, Malaysia, palm oil, Sustainability, CPO, demand, EU Deforestation Regulation