China to import more palm oil from South East Asia to offset falling EU demand

Chinese Premier Li Keqiang has pledged to buy another 500,000t of Indonesian palm oil during the China-Indonesia Business Summit, in a bid to offset declining demand by EU member states.

China is currently one of the top importers of Indonesian palm oil, purchasing 12% of Indonesia’s palm oil exports, according to Bloomberg. Li said that the deal was designed primarily to help smallholder farms.

The Indonesian Palm Oil Association said it expected domestic exports to rise, since China recently introduced higher tariffs on soybeans from the US. In contrast, Chinese imports of Indonesian palm oil have risen steadily.

During this year’s Chinese New Year festivities, the demand for Indonesian palm oil rose by 6%, from 307,490t to 326,300t between January and February. Last year, Indonesian palm oil exports were 3.73 million tonnes, more than 70% of China’s five million tonnes of palm oil consumption.

Indonesian President Joko Widodo responded that the deal would be renewed annually.

Earlier this year, the European Parliament approved several draft measures designed to meet environmental goals, including a ban on palm oil in motor fuels beginning in 2021.

China will also be increasing its trade activities with Malaysia, another large producer of palm oil. Chinese ambassador to Malaysia Bai Tian said that China will be importing more palm oil and palm-based products from the south-east Asian country.

Tian told the New Straits Times that China ‘will not set any limit’ on palm oil imports and that Malaysia could ‘rely on us as a friendly party’.

The Malaysian Palm Oil Board recorded that exports to China have been generally declining since peaking at four million tonnes in 2009. Last year, Malaysian exports rose from 1.88 million tonnes to 1.92 million tonnes, a small increase of 2%.

Together, Indonesia and Malaysia produce nearly 90% of the global palm oil supply.