US tariffs to impact palm oil demand and prices, says CIMB Securities
07/04/2025 (New Straits Times), Kuala Lumpur - The reciprocal tariffs imposed by the US on all its trading partners and the retaliatory tariffs imposed by China on US goods will lead to weaker demand for commodities.
CIMB Securities said if the recent decline in crude oil prices persists, this could exert further downward pressure on crude palm oil (CPO) prices, as the reduced palm oil–biodiesel breakeven will undermine biodiesel demand over time.
The firm's average CPO price forecast of RM4,200 per tonne for 2025 remains unchanged at this stage.
"However, we estimate that for every RM100 per tonne decline in CPO price assumptions, our earnings forecasts for plantation companies under our coverage would be cut by approximately 3-7 per cent," it said in a note.
It said the US' reciprocal import tariffs will have implications for global palm oil demand.
Palm oil exports to the US will be subject to a 10 per cent import tariff starting immediately. Beginning April 9, US tariffs will increase to 24 per cent for Malaysian palm oil and to 32 per cent for Indonesian palm oil.
"These tariffs will raise the cost of palm oil for US end-users. The tariff-induced price increase is likely to drive US food manufacturers and consumers to substitute palm oil with more competitively priced domestic alternatives such as soybean oil — benefiting US soybean farmers.
"For US buyers unable to easily replace palm oil in their product formulations, the higher input costs could lead to either increased consumer prices or margin compression for producers," it said.
In 2024, Malaysia exported only 191,000 tonnes of palm oil to the US, representing around 10 per cent of the US's palm oil imports and 1.1 per cent of Malaysia's total palm oil exports.
It also said that palm oil could indirectly benefit if China reduces its soybean crushing activity owing to the high tariffs and seeks palm oil as a replacement for the resulting shortfall in domestic soybean oil supply.
"However, we expect this substitution effect to be limited, given the broader drag on global growth from rising inflationary pressures and trade uncertainties. The newly imposed 34 per cent tariff effectively prices US soybeans out of the Chinese market.
"As a result, China will likely ramp up purchases from Brazil, Argentina, and other soybean-producing countries."
The firm maintained an 'overweight' call on the agriculture and forestry sector as direct exposure to US tariffs remains limited for Malaysian palm oil.