Palm Oil Market anticipated to Expand, says Beroe
Source: PR Newswire
Raleigh, NC, Feb 1 - Palm oil is a constituent of many diets worldwide and has other uses. Aside from its widespread use in foods and cosmetics, palm oil is being explored as a potential source of biofuel. Global palm oil demand is expected to soar with increased demands from India, China, Europe, and African countries. Being a tropical crop, the global shortage of palm oil managed to maintain the prices soared up. Also, the global palm oil prices and supply are highly impacted by Indonesia’s palm oil trade policy, which has been dynamic in the past months.
The palm oil value chain begins with fresh fruit bunches and has various end-use applications. In Malaysia, most of the big palm oil manufacturers are integrated from the plantation level until the end-user gains maximum profits through economies of scale and the elimination of mediators. Indonesia is one of the key palm oil-producing countries, with 59 percent of the global palm oil market, followed by Malaysia at 43 percent.
Indonesia and Malaysia are the largest palm oil-exporting countries, accounting for approx 90 percent of the global exports, with most of the imports to India, the largest palm oil importing country. India’s imports were declining till June but increasing since the beginning of July and are expected to improve in the upcoming months.
The Indonesian government had ordered export restrictions to curb the exports, preserve stocks for domestic consumption and control palm oil prices. The export ban was lifted after farmers staged protests due to decreased price premiums, and traders stopped buying from farmers.
The commodities supply chain of Russia and Ukraine was majorly impacted due to the movement restrictions and shutdown of significant ports in the previous quarter. The export of major competitor sunflower oil, which remained dormant in the past months, started reviving and is anticipated to increase in the coming months, and huge export quantities of edible oil and other major commodities are expected to improve the supply and demand.
As per market analysis, the palm oil suppliers have high power to influence the prices, as they are large integrated suppliers. There is no product differentiation, and the industry operates on economies of scale, the barriers to new entrants, and the intensity of rivalry is medium to high. Most of the palm oil suppliers are integrated from the palm plantation until the end of refined palm and palm derivatives. The market is consolidated, and significant producers account for around 70 percent of the production.
Palm oil buyers are food companies, bio-diesel manufacturers, and animal feed companies with less influence on the prices than suppliers. It is a market driven by market fundamentals over buyer power.
The crude palm oil is processed into the RBD Palm Olein and Stearin. Globally, palm oil derivatives are estimated to increase at a CAGR of 1 percent from 2015 to 2021–2022. Crude palm oil prices and share prices are falling after the export ban. With an increasing trend in the population and FMCG industry, the usage of palm oil derivatives will substantially increase.
The top palm processors, such as Cargill, Wilmar, Bunge, KLK, etc., occupy about 60–70 percent of the market share.
Margins are the highest in South-East Asia, where several suppliers have downward integration in the supply chain. North American and European manufacturers have comparatively lower margins.
The market is anticipated to expand in the future as a result of the Malaysian government's promotion of Malaysian sustainable palm oil.
The biofuel standards that are being adopted across the world will encourage the expansion of the palm oil sector. The use of palm and palm derivatives in goods like lubricants, solvents, and other items is being encouraged by environmental legislation in Europe and other industrialized nations. Since they are less harmful to the environment than synthetic additives, palm derivatives like heavy-cut esters are frequently utilized to make maritime lubricants.
The key players have now focused on adopting various strategies, such as product innovations, mergers and acquisitions, R&D, collaborations, and partnerships to capture the market share in the global palm oil market.
Engaging directly with integrated manufacturers/suppliers in key procurement regions will ensure a steady supply base. Owing to the elevated demand from the end-use industries, such as biodiesel, cosmetics, and pharmaceutical, the palm oil market is expected to grow at a fast pace. The increasing demand for biodegradable and sustainable products can be attributed to the market growth, which is a result of the market shift to reduce the dependency on petrochemicals.
The players focus on innovations; for example, soft oils are commonly used as salad oil in mayonnaise production. The liquid portion of palm oil, called palm olein, may be separated into oils with varying iodine contents. Because the final product hardens while stored at fridge temperature, typical palm olein (IV 56–58) is only appropriate for frying and is not ideal for mayonnaise or salad dressing. Higher IV (60–67) palm oleins are suitable as a salad oil and for making salad dressing. Using palm oil veneers treated with densified resin, MPOB has created a very resilient construction material known as a high-density palm plyboard. Then veneers are bonded together under heat and pressure, forming a rigid surface that quickly resists abrasion, moisture penetration, and deterioration. The product is more durable than standard palm ply board.
Companies are also looking for new technologies and policies to address climate change's impact and lower carbon emissions; IOI plantations have set a CO2 reduction target to reduce our emissions by 30 percent by 2030 against 2020 levels. The total energy usage levels have been controlled and decreased slightly compared to 2020. The GAR Social and Environmental Policy (GSEP) reflects labor requirements in the palm oil industry. It upholds the United Nations Declaration of Human Rights for indigenous peoples, local communities, contractors, and employees in all business activities by utilizing the UN Guiding Principles on Business and Human Rights.
Under RSPO, the Certified Sustainable Palm Oil Production Area has been increasing since 2018. The RSPO is converting many lands into certified lands that abide by sustainability guidelines. Some primary practices include Responsible land use, no Deforestation, no New Planting on Peat, and GHG emission management.
To reduce greenhouse gases and prevent pollution and air quality degradation, the zero-burning pledges are followed by plantation growers. RSPO audits the palm oil plantations and checks various aspects, one of which Is the Zero burning in plantations pledge.
For more such market data, insights, and intelligence check out Beroe LiVE.Ai™.
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