The global shortage of sunflower oil and rapeseed oil will increase the demand for crude palm oil in the EU

Due to the global shortage of sunflower oil and rapeseed oil, Russia and Ukraine account for nearly 75% of global exports, which will make the EU re-examine the sustainable palm oil in Malaysia and Indonesia. However, industry observers said that Malaysia’s low palm oil production may limit its ability to meet the potential demand of the EU. At present, the ongoing conflict between Russia and Ukraine has led to the closure of some sunflower seed pressing plants and ports in Ukraine, and the production and export of sunflower oil and sunflower meal have been disrupted, which means that the global edible oil trade has been seriously disturbed, because the market had expected the export of Ukrainian sunflower oil to increase, so as to partially alleviate the tight supply of the global edible oil market.

Dr. cecia Varga, the owner and co-founder of Singapore palm oil analysis company, said that the EU could replace China as the second largest buyer of Malaysia in 2022. India remains the largest buyer. But Dr Varga said the EU was unlikely to overturn its decision to ban the import of palm biodiesel by the 2030 deadline. In an interview with Singapore’s New Straits Times, Dr. Varga said that Indonesia and Malaysia filed lawsuits with the world trade organization to overturn the ruling of the EU renewable energy directive (Red II). If the EU cancels this decree, it will be a ruling from the WTO.

Huang Likai, research director of galaxy Lianchang international securities, said that in view of the closure of crushing plants and ports in Ukraine, buyers will need to find opportunities elsewhere to temporarily fill the supply gap – mainly palm oil and soybean oil. She added that there was uncertainty about how long it would take Ukraine to resume exports and whether the West would impose sanctions on Russian agricultural exports. Meanwhile, panic buying by consumers to make up for the temporary shortage of edible oil supply in Ukraine may continue until the situation improves. Palm oil and soybean oil may benefit from this trend. Therefore, the price of crude palm oil may remain high in the short term, which is higher than the expected average price of crude palm oil of rm4100 / ton in 2022 predicted by Galaxy Lianchang. However, if Russia and Ukraine reach an agreement to resume edible oil trading, palm oil prices may be significantly revised from the current high prices.

Dr. AMAD Parviz guram Kadir, director of the Malaysian palm oil bureau (MPOB), said that the shortage of Black Sea sunflower seed oil led to an increase in buyers’ demand for palm oil and soybean oil in Malaysia and Indonesia to fill the gap between supply and demand. In terms of supply, Malaysia’s low palm oil production may limit its ability to meet the increased demand for palm oil in the EU, as there is still demand in other importing countries such as India, China and Turkey. He added that the EU has set trade barriers to palm oil imports based on the redii decree. These barriers are considered discrimination against palm oil biodiesel. However, the import of palm oil for food and other non food purposes is not subject to such barriers. Considering the current tension in global sunflower oil supply caused by the conflict between Russia and Ukraine, coupled with the shortage of soybean oil in South America, it is indisputable that European countries obviously need palm oil to fill the supply and demand gap left by sunflower oil. However, it is still too early for the EU to reassess its discriminatory policy on palm oil. The average price of crude palm oil in Malaysia in March 2022 was rm6867.00, the highest monthly price record so far. Dr. Kadir said that with the development of the current conflict between Russia and Ukraine, it will have an impact on the global supply of sunflower oil, especially on the demand of the European Union and India. It is expected that the demand for palm oil will increase in the coming months. On the supply side, he expects that crude palm oil production will increase restoratively, especially in the second and third quarters of 2022, so as to narrow the gap between supply and demand. He predicted that crude palm oil prices would gradually stabilize as early as may 2022.

Source: Master Boyi

Post time: Apr-22-2022