Malaysia harnesses economic, trans-fat-free benefits to spotlight the Middle East as a major new export market

Earlier this year, MPOC CEO Datuk, Dr Wan Zawawi Wan Ismail, previously revealed to us the council’s plans to diversify Malaysian palm oil export markets beyond its two main markets. current, China and India.

“The current palm oil market has only two major exporters of palm oil – Indonesia takes about 70% and we take about 26% to 27% and it has been that way for some time. “, he told us.

“If we are not looking to diversify our export markets and find new markets to break into, then it will forever remain stagnant and Malaysia will remain at 27%. We must therefore diversify to break with traditional markets and this stagnation [and although] India and China remain very important markets for us and will continue to be a priority, we are also focusing our energies on other parts of the world [including] Middle Eastern countries like Saudi Arabia and Iran.

MPOC deputy CEO Belvinder Sron reiterated this goal at a recent COPD virtual event focused on the trends and potential of palm oil in the Middle East, saying the council plans to develop further. the region as a major export market.

“MPOC is stepping up its efforts to increase its market share in the Middle East region because it is very important to us”Sron has spoken.

“Overall, the Middle East imported over six million tonnes of oils and fats last year, 41% of which was palm oil, and we believe there is great potential. additional growth here.

“One of the defining factors for us is that there are rising expectations for health and wellness in the region, as Saudi Arabia raising concerns about trans fats in food – oil palm is trans fat free, which is a big plus for us. because many food companies are already phasing out trans fats in their food formulations because they are dangerous to health. “

Malaysia exported some 2.5 million tonnes of palm oil and palm oil products to the Middle East in 2020 – but this number does not reflect the norm, as imports have been heavily influenced by the impacts of COVID-19 lockdowns in the region.

“Palm oil has been the largest edible oil imported to the Middle East for many years, averaging some 2.7-2.8 million tonnes per year – last year this saw a decline of some 300,000 tonnes due to the COVID-19 pandemic ”,Said Faisal Iqbal, director of marketing and marketing development at COPD.

“In this region, palm oil consumption is very dominant in the food manufacturing and hospitality sector, while sunflower oil is more dominant when it comes to home consumption. decline while sunflower oil has seen an increase due to home consumption.

“That said, we expect this trend to reverse in favor of palm oil in 2021 as we are already seeing a return in demand in the region,” [especially when] in countries like Turkey and the United Arab Emirates, life is returning to normal faster than in any country in Asia. “

In the Middle East, only five countries – Turkey (35%), Iran (26%), South Africa (11%), Iraq (10%) and United Arab Emirates (4%) – account for 86% of demand for because of their most populous and having the most established food industries.

Cost advantages

Palm oil also has the distinct advantage of being cheaper than most other edible oils – for example, as of September 21, 2021, the price of crude palm oil was $ 1,230 per tonne, versus $ 1,391 per tonne of soybean oil. , which gives it a price advantage of US $ 161 per tonne.

“In countries like Turkey, palm oil has the advantage of being cheaper and more affordable than other oils, which is very important in this market”,The general coordinator of the Association of Manufacturers of Culinary Products and Margarine (MUMSAD) said Ebru Akdag.

“There is also an increase in expectations for trans fatty acids for products in the country, and new regulations have said that must be less than 2%, so palm oil can certainly play a role – especially considering the importance of margarine to the local food industry, where it goes to some 92% of households nationwide.

Alami Commodities Managing Director Ahmad Alami agrees on both points, adding that in addition to the lower price of palm oil due to falling production costs, rising prices of other oils also increase the contrast.

“There has been an increase in sweet oil prices in the region, making palm oil more attractive to consumers – and the benefit is that they will try it, use it and then see how effective it is. and the economy, thus converting them into continuing to use palm oil ”,Alami said.

“[A good example of how important oil prices are] to markets like Saudi Arabia can be seen clearly in the numbers – in 2020, even with COVID-19, Malaysian palm oil absorbed 70% of the country’s edible oil imports from 30% the year before , which more than doubled in number due to Indonesia’s levy on its palm oil exports which pushed up prices.

Challenges and opportunities

That said, Akdag pointed out that a number of challenges still exist for palm oil in the region, particularly in Turkey where sunflower oil is the dominant benchmark oil.

“We know from previous local testing that Turkish consumers have resisted using palm oil at home because they are not used to the color, which is not bright yellow like the sunflower oil. “she says.

“Some media have also created prejudice, so that many consumers have a negative image of palm oil, including misleading reports that palm oil is equivalent to trans fatty acids, which is of course not true. but negatively affected consumers. “

Alami added that another big hurdle to be addressed is freight costs which have continued to rise since the start of the pandemic.

“Although palm oil has a distinct cost advantage as a commodity, the increasing transportation costs to bring it from Malaysia have sometimes made other oils packaged and imported from neighboring countries cheaper due to logistic “he said.

“For example, it might cost around $ 6,000 to bring a container of palm oil from Malaysia to Saudi Arabia, but only $ 1,500 to bring the same amount of sunflower oil from Turkey – those costs more. high prices could erode the existing financial benefits of palm oil. .

“It would also be wise to remember that there is always regional instability and tensions here, which could restrict trade, so all exporters need to be alert.”

Despite these obstacles, Iqbal said he was convinced that the Middle East region has enormous potential for Malaysian palm oil.

“The Middle East is one of the very few markets to experience growth in Malaysian palm oil imports in 2021, both in terms of volume and value – in the first eight months of 2021, they imported 1.77 million tonnes, up 3.9% over the same period. schedule in 2020, and major markets such as Iran and the United Arab Emirates in particular have increased significantly by 80.4% and 10% respectively ”,he said.

“Markets are opening up and there are many festivities and events going on, such as the Dubai World Expo, FIFA 2022 in Qatar and maybe the full recovery of Hajj and Umrah pilgrims – all of these factors offer positive outlook for palm oil. In the region, [so] we still believe that the Middle East is a consistent and reliable export destination for palm oil.

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