Global Palm Oil Market - Indonesia, India, and China Emerge As the Major Consumers

Vegetable And Animal Oils And Fats August 09, 2018
Author: Sergey Avramenko
Head of Global Markets Research Team

Global Palm Oil Market

IndexBox has just published a new report "World: Palm Oil - Market Report. Analysis And Forecast To 2025". Here is a summary of the report’s key findings.

Palm Oil Market Growth Has Conceded to Stagnation

The global palm oil market increased from 50.0M tonnes in 2007 to 59.9M tonnes in 2016, expanding with an annual average growth rate of +4.3% per year over that period. The stable growth observed over the period from 2007-2015 conceded to a decline in 2016, although this remained negligible. In wholesale prices, the market totalled $41.8B, $13.4B (or 24%) less than the highest level observed in 2012 (IndexBox estimates). This figure reflects the total revenue of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). From 2012 to 2016, despite some periods of stabilization, palm oil market volume  observed a steady decline, due to a fall in palm oil prices worldwide. 

Global Palm Oil Market

The Global Consumption of Palm Oil Is Expected to Reach 69.1M Tonnes by 2025

Oils are primarily used for food purposes, such as cooking oil for frying and baking. In many cultures, vegetable oil serves as the base for salad dressings, margarine, and shortening; and as an ingredient in confections, baked goods, and processed foods. They serve as stabilizers, emulsifiers, and shelf-stable substitutes for dairy and animal fats.

Vegetable oils are also frequently additives in pet foods. Modern commerce and industry have identified a number of new practical applications for vegetable oils. This expansion of the use of vegetable oils has resulted in greater and more complex demand. Vegetable oils are now used for a variety of commercial and industrial purposes besides food: as the base for common household goods such as soaps, cosmetics, toiletries, candles, paints, and even biodiesel fuels.

Today the companies whose products line our pantries and medicine cabinets are all buying vegetable oils. Without necessarily realizing it, consumers around the world have come to rely on a cheap and readily available supply of vegetable oil.

The negative campaigns aimed at discontinuing the food use of palm oil  and replacing it with other vegetable oils on health grounds had adverse  effects and temporarily hindered the raise in palm oil consumption.  The bottom line of these campaigns, initially motivated by the American Soybean Association, was the replacement of edible palm oil by soy bean oil, but their impact faded away, following the results of scientific research and accurate public information campaigns, financed mainly by the major palm oil producing countries.

In addition, European countries plan to ban the use of palm oil, both in the biofuel industry and also partly in the food sector. Equally, if the ban on the use of biofuel is being adopted to preserve the tropical rainforests of Southeast Asia, then the prohibition on palm oil use in food products will indicate any negative effects in terms of consumer health.  

Nevertheless, the Asian region countries (mainly India, the Southeast Asian bloc countries and China) constitute one of the fastest developing palm oil markets. The steady growth in demand being observed here is in line with rising household income figures and urbanization, as well as an increase in the use of palm oil as a vegetable oil for food products and Asian dishes. 

Driven by the anticipated growth of population and income level, the demand for high-quality oil will continue to grow. On the other hand, the growing popularity of healthy eating, using vegetable oil for products in "fast food" establishments, and the lowest price factor in terms of vegetable oil products, as well as oil use for cooking worldwide (especially in Asian countries) should also support palm oil consumption over the next nine years.

Therefore, market performance is predicted to grow with an anticipated CAGR of +2.8% for the next nine year period, which is forecasted to bring the market volume to 69.1M tonnes by 2025.

Large Asian Countries -  Indonesia, India, China and Malaysia – Remain Major Consumers of Palm Oil

The countries with the highest consumption were Indonesia (17.3%) and India (13.7%), followed by China (7.9%), Malaysia (7.5%), Pakistan (4.3%), Bangladesh (3.6%), Thailand (3.1%), Italy (2.4%), Colombia (2.0%), Nigeria (1.9%), the Philippines and the Netherlands (1.7%, each). The other countries together comprised almost 33% of global consumption. 

The highest annual rates of growth in terms  of palm oil consumption from 2007 to 2016 were recorded in the Philippines, with a +35.0% growth, Italy, with +13.8%, India, with +11.4%, Thailand and Colombia, with +10.3%, each. Consequently, India (+6 percentage points), Indonesia (+3 percentage points) and the Philippines (+2 percentage points) strengthened their share in terms of global consumption from 2007 to 2016. By contrast, the shares of China (-5 percentage points), Malaysia (-4 percentage points) and Bangladesh (-2 percentage points) declined over the period under review.

Amongst the leading consuming countries, high levels of per capita consumption were recorded in Malaysia (147.7 kg/year in 2016), which was significantly higher than the world average of 8.2 kg/year. In this country, per capita consumption slightly declined in 2007-2016. The annual growth of per capita consumption from 2007 to 2016 was the most notable in the Philippines, with a +33.1% growth, Italy, with +13.7% growth, India, with +10.1% growth, Thailand, with +10.0% and Colombia with +9.3% growth.

Indonesia and Malaysia Remained the Main Producers of Palm Oil

The global production of palm oil was estimated at 62.6M tonnes in 2016, 2.7M tonnes more than in 2015. From 2007 to 2016, palm oil output showed upward trend. The palm oil production value was estimated at $39.3B in 2016, a increase of $2.4B (or +7%) against the production figure recorded in the previous year.

The palm fruit yields two distinct oils – palm oil and palm kernel oil. Palm oil is extracted from the pulp of the fruit, is edible and used primarily in food products. Palm kernel oil is extracted from the seed of the fruit and is used mainly in the manufacture of soaps and cosmetics, while palm kernel expeller (PKE) is used as a feed for livestock and as biofuel for generating electricity.

Oil palm is highly productive, capable of yielding more oil from less land than any other vegetable oil, with relatively modest inputs. As a result, palm oil production has become an important source of income and a major part of the economy in the regions where it is grown, providing livelihoods for local communities and helping to lift people out of poverty.

Palm oil is an edible vegetable oil, high in saturated fats, derived from the fruit of the oil palm tree. It is grown commercially in several tropical countries but mainly in Indonesia (53%) and Malaysia (32%), which account for 85% of global palm oil production. They were followed by Thailand (3%), Colombia (2%), Nigeria (2%), Guatemala (1%) and Papua New Guinea (1%), which all lagged somewhat behind.

Approx. 70% of Global Production Was Exported

Palm oil is a widely traded commodity, with the share of exports in total global output attaining an average of 75% over the 2007-2016 period. The share of exports in production increased by 70% in 2007 and peaked at 80% in 2009; the export share then fluctuated slightly, before falling again to 70% in 2016.

A high trade intensity is determined mainly by the substantial distances between the main countries of palm oil manufacturing and key consuming countries. Palm oil will continue to be highly traded, fueled by increasing consumption, intense global and regional integration.

Indonesia and Malaysia Remain Key Exporters of Palm Oil

In 2016, the volume of global exports totaled 44.5M tonnes, falling abruptly after a long-term steady increase from 2008-2015. This decline was largely conditioned by a decrease in exports from Indonesia due to shrinking demand in some foreign markets and increasing domestic demand within food and biodiesel industries. In value terms, the global exports stood at $27.9B, decreasing steadily from 2013-2016; this decrease is primarily owed to a long-term decline of the export prices on the backdrop of increasing supply.

Indonesia (22.8M tonnes) and Malaysia (16.1M tonnes) constitute the main suppliers of palm oil in the world, with a combined share of 87% of global exports. Exports from Indonesia increased at an average annual rate of +7.5% from 2007-2016, while in Malaysia the rate of growth stood at +3.7% per year. The Netherlands, Guatemala, Papua New Guinea, Germany and Honduras constituted the other countries with noticeable volumes of exports. Moreover, Honduras (+22.6% per year) emerged as the fastest growing supplier, thereby ranking fourth in terms of global palm oil exports in 2016. Given the fact that the Netherlands and Germany do not produce any palm oil, their exports should be referred as re-exports of the previously imported produce.

India and China Constitute the Largest Markets for Imported Palm Oil

The volume of global imports totaled 41.9M tonnes in 2016, equating $30.6B. The trend pattern of imports generally mirrored that of exports: these trade flows globally complement each other. 

In 2016, India (8.3M tonnes), China (4.5M tonnes), Pakistan (2.6M tonnes), the Netherlands (2.3M tonnes), Bangladesh (2.1M tonnes), Italy (1.5M tonnes) and Germany (1.4M tonnes) constituted the leading destinations of palm oil imports, together comprising 54% of global imports. Amongst the major importing countries, India (+11.3% per year) and Italy (+12.9% per year) gained the highest annual growth rates from 2007 to 2016. Conseqently, while the shares of India (+9 percentage points) and Italy (+2 percentage points) in terms of global imports increased significantly from 2007 to 2016, the shares of China (-7 percentage points) and Bangladesh (-2 percentage points) illustrated a noticeable contraction. The shares of the other countries remained relatively stable throughout the analyzed period.

Global Palm Oil Market

Do you want to know more about the global palm oil market? Get the latest trends and insight from our report. It includes a wide range of statistics on

  • palm oil market share
  • palm oil prices
  • palm oil industry
  • palm oil sales
  • palm oil import
  • palm oil export
  • palm oil market forecast
  • palm oil price forecast
  • key palm oil producers

Source: World: Palm Oil - Market Report. Analysis And Forecast To 2025