The European Union’s deforestation regulation is unlikely to have a significant impression on demand for Southeast Asian palm oil as the excess is shrinking amid rising consumption from growing international locations, a number one trade analyst mentioned on Monday.
The EU in December agreed a deforestation regulation that requires firms to provide a due diligence assertion and supply “verifiable” data that commodities, together with oil palm, weren’t grown on land deforested after 2020, or danger hefty fines.
The regulation has been welcomed by environmentalists as an necessary step to guard forests, however palm oil producers have accused the EU of blocking market entry for the edible oil.
James Fry, chairman of commodities consultancy LMC International, advised Reuters the regulation may cut back import demand within the EU, however the surplus can be absorbed by patrons reminiscent of India, Bangladesh, Pakistan and African international locations.
“There is not enough palm to meet all the markets, and India would be very happy if the EU’s deforestation law meant there was more palm oil for India,” Fry mentioned in an interview.
The European Union is the world’s third largest palm oil importer with a shrinking market of lower than 10%, whereas Asian international locations reminiscent of India and China account for greater than 40% of worldwide imports.
Output of the tropical oil has been rising in prime producer Indonesia, however the surplus has been largely absorbed domestically due to its bold biodiesel mandate, he mentioned.
Indonesia in January launched its biodiesel programme with a compulsory 35% palm oil content material, increasing from the earlier 30%, geared toward lowering reliance on imported diesel and propping up demand.
In the second largest producer Malaysia, the place manufacturing final 12 months was 18.45 million tonnes, Fry mentioned output had began to plateau as a result of replanting of unproductive oil palm timber had slowed down.
“In Malaysia, the challenge will be whether production will exceed over 20 million tonnes,” he mentioned.
Palm oil exports from the highest two producing international locations peaked in 2019 and are unlikely to get near that once more, Fry mentioned.
Source: www.anews.com.tr
