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Date [ 2015-07-15, 05:17 ]

There are challenges the industry has to face in the race to day ahead.

More_land_needed_for_oil_palms.

(Kuala  Lumpur=Koreanpress) Camilo Menzes = Frost & Sullivan is of the opinion that  Malaysia’s palm oi liIndustry needs to enhance upstream productivity and exploit downstream opportunities.

The industry currently accounts for about RM50 billion annually. With limited land available, labour woes, Indonesian competition and trade wars environmental concerns, Malaysia will need to enhance upstream productivity and exploit the full potential of downstream opportunities.

The Malaysian Palm Oil National Key Economic Area (NKEA) is targeted to reach RM178 billion by 2020, and 98% of funding will be from the private sector, reinforcing their leading role in steering the palm oil industry.

According to Chris de Lavigne, Global Vice President of Consulting, Frost & Sullivan, the global palm oil production is expected to grow at a Compound Annual Growth Rate(CAGR) of 5.9% in the period 2011 to 2020 to reach 84.0 million MT; Majority of the growth is expected to come from Indonesia with a CAGR of 7.8%, and production in Malaysia is expected to expand only by 2.7%.

“Palm prices have however been challenged in the short terms and not held up by biodiesel as in the past. Weather is one of the key factors in the supply equation of oilseeds and palm oil. It is also an important catalyst to price movement,” de Lawigne said.

Palm oil yield

With limited land for further expansion, the only way to substantially increase Malaysia’s production of palm oil is via yield increases. Compared to other vegetable oils, palm oil has high yield, but a poor record in yield improvements.

While soy yields improve at an average rate of 1.2% per annum and rapeseed at 2% per annum, palm oil yields have been growing at a dismal rate of 0.2% per annum.

Indonesia and frontiers

Malaysia and Indonesia are at slightly different developmental phases and have different policy agendas and objectives. Indonesia is on a fast track to catch up in the refining and downstream sector and their policies reflect this objective.

“In September 2011, Indonesia introduced a new export duty structure to trigger a refinery and downstream boom.  It offered their processed palm oil exporters a substantial cost advantage over Malaysia,” de Lavigne continued.

Longer term land availability will start to bite in and should uphold palm prices

In Malaysia, growth has slowed as suitable new land for planting is diminishing rapidly. The edible oil market is now “short” over a million planted palm oil hectares over the next decade due to the slowdowns in Malaysian and Indonesian plantings.

In 2012, the Ministry of Agriculture Malaysia commented that Malaysia’s planted area will only increase by approximately 400,000 ha in the coming years – this implies less than four years of planting at the current rates. Meanwhile Indonesia’s  recent moratorium on new land allocations further points to a slowdown in that market as well.

“Malaysia and Indonesia may need to find new applications for palm oil in order to take up the slack caused by increased Crude Palm Oil (CPO) supply,” divulged de Lavigne.

He continued, “The basic oleochemicals market is saturating and stagnating as well as suffering from low margins. Malaysia’s focus will now have to shift from basic oleochemicals to high value oleo derivatives, from a current 1% share to a forecasted 40% by 2020.”

de Lavigne has suggested, to keep ahead in the industry, Malaysia focus on the following five key products: Agro-chemicals, Surfactant, Biolubricants/ chemicals , Bio-polyols  and Glycerol derivatives

The writing is on the wall and Malaysia will have to flow both up and downstream and take the opportunities therein. Otherwise it could very well be at the back of the race.

abc@koreanpress.net

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