Palm Oil Stakeholders Need To Navigate Market Dynamics To Ensure Continued Growth
31/12/2024 (Business Today) - In 2024, the global palm oil market experienced notable growth, influenced by various factors including production levels, policy changes and shifts in demand.
Market Growth and Projections
The global palm oil market was valued at approximately US$70.44 billion in 2023 and is anticipated to grow at a compound annual growth rate of 5.1% from 2024 to 2030.
These projections are driven by increasing consumer awareness regarding the health benefits of palm oil and its growing application in biodiesel production.
As a result, palm oil prices saw significant fluctuations throughout the year. As of Dec 31, 2024, palm oil prices increased by 21.18% since the beginning of the year, trading at approximately RM4,509 per metric tonne (MT).
In September 2024, the average price was US$988 per MT, nearly 19% higher than in September 2023.
These price movements were influenced by factors such as production levels, export policies and global demand.
In terms of production and export dynamics, Indonesia and Malaysia continued to dominate global palm oil production, accounting for a significant share of the market.
In 2023-2024, Indonesia produced 44 million tonnes, while Malaysia produced 19.7 million tonnes.
Indonesia’s plans to increase its biodiesel mandate from a 35% blend to 40% palm oil content are expected to raise biodiesel consumption to 16 million kilolitres, potentially reducing export volumes and tightening global supplies.
Meanwhile, the European Union’s (EU) Deforestation Regulation, effective from Dec 30, 2024, which aims to curb imports of commodities linked to deforestation including palm oil, has raised concerns among major producers like Indonesia and Malaysia.
Both countries who continue to dominate the global palm oil production and account for a significant share of the market fear significant disruptions in the global supply chain and a reduction in shipments to the EU due to the regulatory change.
Nevertheless, the efforts toward sustainable palm oil production continued, with various stakeholders emphasising the need for responsible sourcing and environmental stewardship.
According to the 2024 Palm Oil Scorecard, while some companies have made progress in eliminating deforestation and human rights abuses from their supply chains, the industry as a whole still faces significant challenges.
In Malaysia, Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani urged palm oil mills to integrate artificial intelligence (AI) technology in palm oil processing as one of the methods to reduce cost and increase revenue.
He said the integration of AI into the palm oil production process is pivotal as it can enhance efficiency, reduce foreign labour dependency and ensure the highest standards of quality and sustainability.
He explained that the palm oil mill, via the AI technology used, can reduce its workforce, especially foreign labour, by about 30%-35%, thus saving nearly 35% in overhead costs.
Overall, the palm oil market in 2024 was characterised by growth in market value, price volatility, regulatory challenges and ongoing sustainability efforts. Stakeholders in the industry will need to navigate these dynamics to ensure continued growth and compliance with evolving global standards.