KUALA LUMPUR, May 31 2019 : The Malaysian palm oil will still have its market in the European Union (EU), despite the trading bloc’s decision to phase out palm oil- based biofuel, says Sime Darby Plantation Bhd executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh.
He said the company believed the EU would face some constraints in getting palm oil substitutes especially since it is a net importer of palm oil.
“We believe the ban may not be enforced in totality because it will face constraints in terms of getting alternatives (other edible oils such as rapeseed oil, sunflower oil or soybean oil).
“Europe is a net importer of oil so it will be difficult for them, so we believe that palm oil will continue to flow although the EU requirements for palm oil will change slightly,” he told reporters after the company’s first quarter results announcement here today.
Mohd Bakke said previously, the EU purchased palm oil for food (50 per cent) and non-food (50 per cent) but today the consumption for food products has fallen to 40 per cent.
Mohd Bakke said the market constraints in the EU would make it difficult for it to simply switch from palm oil to any other edible oil, hence it would still have a market there.
Meanwhile, on the crude palm oil price outlook, Mohd Bakke said the company expected the commodity’s price to hover between RM2,000 per tonne and RM2,250 per tonne in the second half of the year.
“The sentiment and the market today do not seem to be exciting at all, particularly with the United States- China trade war, and it was also made worse by other factors,” he said, adding that the EU’s ban on palm oil as biofuel by 2030 also affected sentiments.
“It will certainly have an impact on demand. But the good thing is, although the EU made its decision to phase out palm oil-based biofuel, it is still purchasing more palm oil for the next few months of 2019 compared to the same period last year.
“This is due to the pressure from rapeseed supply. So market forces will certainly come in,” he explained.
He said the EU’s decision to ban palm oil was not only due to environmental or health reasons alone, as there were other factors which have guided or governed the EU’s thinking.
According to data from the Malaysian Palm Oil Board, Malaysia’s palm oil export to the EU decreased by four per cent to 1.91 million tonnes in 2018, compared with 1.99 million tonnes recorded in 2017.
Back home, Mohd Bakke also urged the automotive industry to be more accommodating and support the government’s biodiesel agenda to help reduce the stockpiles.
“After the B5 programme was launched by Tun Dr Mahathir Mohamad back in 1981, we have only moved to B7 and B10, that is too slow,” he said.
After serving the Sime Darby group for close to nine years, today marked his last results briefing with the media as Mohd Bakke would be retiring as Sime Darby Plantation managing director on June 30. – Bernama