MALAYSIA will use diplomatic channels to overcome India’s restrictions on palm oil imports, said Teresa Kok.

The primary industries minister said Putrajaya is also eyeing new markets for the commodity, among them Uzbekistan, Kazakhstan, Nigeria, South Africa, Pakistan and Saudi Arabia.

Her comments come after India – Malaysia’s biggest customer for palm oil – imposed curbs on refined palm oil imports, with New Delhi saying the move is to protect local millers.

The restrictions do not affect Malaysian exports of crude palm oil (CPO) to the South Asian country.

India bought 4.41 million tonnes of palm oil products from Malaysia last year.

Last week, India increased its tax on imported refined palm oil to 45%. The tax on CPO is kept at 37.5%.

New Delhi has also reclassified imported refined palm oil from “free” to “restricted”.

Industry players have said the decision will impact Malaysia, which sells more refined palm oil than CPO to India.

Malaysian Palm Oil Board director-general Ahmad Parveez Ghulam Kadir said the difference in taxes for the two types of palm oil will lead to a slight drop in exports this year.

“But, we still do not know what they mean by restricted access for refined palm oil, whether this means they will impose a quota on how much we can export.”

Palm oil prices to be better this year, says board

AVERAGE prices for crude palm oil are expected to be RM2,750 per tonne in 2020, better than last year, according to a government agency that oversees the commodity.

In comparison, crude palm oil had averaged between RM2,000 and RM2,300 per tonne in 2019 due to higher stocks.

The Malaysian Palm Oil Board (MPOB) said the firmer prices in 2020 are due to several factors, such as slower palm oil production, which will lead to a decrease in world supplies.

Another factor helping prices will be the increased usage of biodiesel in vehicles and industries in Malaysia and Indonesia – the world’s top two producers of the commodity.

“The implementation of B30 and B20 mandates will consume a lot of the world stock in crude palm oil,” said MPOB director-general Ahmad Parveez Ghulam Kadir.

Parveez said the two policies are estimated to consume about eight million tonnes per year in Indonesia and 750,000 tonnes in Malaysia.

“Overall, the supply and demand of edible oils this year will remain tight and consumption will overtake supply in the medium- and long-term.

“There will be a shortfall in supply for oil palm and this will keep prices firm,” Parveez said on the sidelines of a palm oil 2020 outlook seminar in Kuala Lumpur today.

MPOB added that export revenue from palm oil products are expected to increase by 21% to RM78 billion in 2020 from RM64.45 billion in 2019.

The commodity contributes about 4.5% to Malaysia’s gross domestic product.

It is a source of income for about two million people in Malaysia, including 650,000 small holders and their families.

Another factor that will affect demand and prices for CPO is the current US-China trade war which has made it more expensive for China to buy US soybean oil, Parveez said.

But a potential trade deal could see soy oil dropping in price and competing with palm oil.