Compliance drives sustainable growth in Malaysia's palm oil sector, says CIMB Securities
09/11/2025 (New Straits Times), Kuala Lumpur - Compliance with sustainability standards such as Roundtable on Sustainable Palm Oil (RSPO), Malaysian Sustainable Palm Oil (MSPO), and International Sustainability & Carbon Certification (ISCC) has become the cornerstone of Malaysia's palm oil industry, strengthening global confidence in its commitment to ethical and environmentally responsible production.
CIMB Securities Sdn Bhd said that certified producers are increasingly adopting satellite monitoring, traceability systems, and smallholder inclusion programmes to ensure deforestation-free and transparent supply chains - aligning with global sustainability expectations while maintaining export competitiveness.
It noted that despite structural challenges such as limited land availability, ageing palms, and a slower replanting rate, Malaysia's palm oil sector remains resilient and strategically positioned for long-term growth.
Global demand continues to expand steadily, by around 3 per cent annually, driven by robust consumption in the food, oleochemical, and biofuel industries, according to CIMB Securities.
As the world's second-largest producer and exporter of palm oil, Malaysia contributes about 24 per cent of global output and 35 per cent of exports, supporting over 438,000 direct jobs and accounting for about 4.2 per cent of the country's gross domestic product (GDP). This foundation underscores the sector's vital role in national economic stability and rural livelihoods.
From 1975 to 2019, Malaysia's oil palm planted area expanded nearly tenfold, from 0.6 million hectares to 5.9 million hectares, largely replacing rubber. During the same period, palm oil production grew from 1.3 million tonnes to 19.9 million tonnes, peaking in 2015 and 2017. While early expansion was concentrated in Peninsular Malaysia, which still accounts for about 45 per cent of the total area, growth in Sabah and Sarawak accelerated from the 1990s onwards.
While land expansion has slowed, the industry's focus has shifted toward yield improvement, estate rehabilitation, and mechanisation. Many plantation firms are now investing in automation and precision agriculture to enhance productivity and reduce dependence on manual labour. These efforts not only address the industry's manpower challenges but also support higher efficiency and sustainability.
Malaysia's palm oil stocks reached 2.36 million tonnes as of September 2025, reflecting healthy inventory levels amid stable demand. The average crude palm oil (CPO) price for 2025 is projected at RM4,330 per tonne, supported by tight global supply and growing biodiesel demand under the B10 mandate - while Indonesia advances towards its B50 target by late 2026.
Although domestic output growth has moderated to between 1 and 4 per cent annually, disciplined replanting, effective disease management, and improved agronomic practices are expected to sustain productivity.
CIMB Securities noted that profitability in the sector hinges on two critical factors - CPO prices and yields - both of which can be strengthened through operational excellence.
As sustainability and compliance become defining benchmarks, Malaysia's palm oil industry is moving confidently towards a future where responsible production, innovation, and global demand converge to drive continued growth and resilience.