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Palm oil exporters may gain more US market share
calendar10-04-2025 | linkThe Star Online | Share This Post:

10/04/2025 (The Star Online), Petaling Jaya - The United States reciprocal tariff differentials between the world’s two largest palm oil producers, Indonesia and Malaysia, could result in supply chain shifts with local palm oil exporters gaining more market share in the United States.

 

The United States has imposed reciprocal tariffs of 32% on Indonesia, versus 24% imposed on Malaysia.

 

CGS International (CGSI) Research in a report said it expects the tariff differentials could potentially benefit Malaysia due to more competitive pricing relative to their Indonesian counterparts.

 

Hence, there is a likelihood that Indonesian palm oil exporters may lose some market share to their Malaysian counterparts, added the brokerage firm.

 

Meanwhile, CGSI Research has maintained a “neutral” call on the sector, amid the uncertainties in the plantation sector in Indonesia.

 

“We recommend investors to focus on plantation companies with a higher Malaysian exposure, mainly due to the Indonesian government’s plan to take control of alleged illegal oil palm plantations, potential market share loss to Malaysia due to the higher US reciprocal tariffs and a weakening rupiah, which may result in higher operational costs in Indonesia,” the brokerage firm noted.

 

Its top sector picks are SD Guthrie Bhd and Hap Seng Plantations Holdings Bhd.

 

According to Bloomberg, the Indonesian government plans to take control of over one million ha of private oil palm plantations, which it deems illegal in a bid to clean up the industry’s image and boost state revenue.

 

The Forest Area Recognition Task Force, established by President Prabowo Subianto, has identified about 1.2 million ha of land hosting “illegal” oil palm plantations, primarily in Central Kalimantan, that will be transferred to newly formed state-owned Agrinas Palma Nusantara, potentially making it the world’s largest oil palm plantation company by land area.

 

“Many plantation firms are currently appealing the planned seizures as losing these parcels of land would significantly curtail their fresh fruit bunch and crude palm oil production,” added CGSI Research.

 

In addition, the brokerage firm said it expects some of the plantation companies with Indonesian exposure may be affected, especially those with higher exposure in Central Kalimantan.

 

“We conducted an earnings sensitivity test with a 3% decline in the companies’ Indonesian total oil palm planted area.

 

“Based on our back-of-the-envelope calculations, Genting Plantations Bhd would see the highest earnings impact, given that it has the highest Indonesian exposure among Malaysian plantation companies,” CGSI Research noted.

 

On the weakening rupiah which has depreciated by about 4% against the ringgit year-to-date, the brokerage firm said it thinks “Indonesia’s weakening currency would raise operational costs as fertilisers and some fertiliser components are priced in US dollars.”

 

On top of that, companies with a higher exposure to Indonesia may also have to book larger currency translation losses due to the weak rupiah.

 

https://www.thestar.com.my/business/business-news/2025/04/10/palm-oil-exporters-may-gain-more-us-market-share