Palm Oil Prices to Climb 17.9% in 2020 on Tight Supplies, Biodiesel Programs: Reuters Poll

by Mei Mei Chu (Reuters) Average palm oil prices will surge 17.9% this year, a Reuters poll of industry participants showed, as reduced output in the first half of the year and higher biodiesel consumption in top producers Indonesia and Malaysia tighten the market.

Indonesia and Malaysia together account for nearly 90 percent of global palm production.

BIODIESEL

“(In) year 2020 much depends on whether Indonesia can produce 10 million kilolitres of biodiesel,” said Christopher Chai, a general manager with Malaysia’s Kwantas Corp.

The market will be closely watching the roll-out of Indonesia’s B30 biodiesel program - biodiesel with 30% palm content - and Malaysia’s newly implemented B20 program, as together they are expected to increase local consumption by 10%-13%, traders said.

Indonesia is targeting 10 million kilolitres (8.7 million tonnes) of biodiesel production this year, while Malaysia’s biodiesel association is expecting to produce 1.7 million to 2 million tonnes of the fuel.

TRADE WARS

Ongoing trade disputes between China and the United States, India and Malaysia, and the European Union and Indonesia will likely affect export shipments this year, poll respondents said.

“The Indonesian government’s battle with the EU on the latter imposing anti-dumping duties on Indonesian biodiesel exporters will hog the media attention,” Sathia Varqa, owner and co-founder of Singapore-based Palm Oil Analytics, said.

Malaysia benefited from the trade war between the United States and China in 2019, with exports to China rising by 33.9% last year. However, a trade deal between the two largest economies may see China resume purchases of U.S. soybeans, which may result in a lower demand for palm oil.

India, the world’s largest edible oil buyer, as well restricted overall imports of refined palm oil on Jan. 8., and informally instructed its traders to avoid purchases from Malaysia following a diplomatic squabble. READ MORE