05.05.2020 (marketscreener.com) - Global demand for palm oil, the world's most widely-used vegetable oil, may have bottomed out after being hammered by the coronavirus pandemic and is now set for a slow recovery, state agency and industry body the Malaysian Palm Oil Council (MPOC) said on Tuesday.
The outbreak of the coronavirus has shut restaurants and limited travel, hitting demand for palm oil used mainly in food but also in renewable fuel.
"I think the lows for demand have been reached. We are more positive that demand will slowly show an upward trend," MPOC chief executive officer Kalyana Sundram said in an interview.
"Uptake will surely look better as the pandemic eases."
Some countries are slowly starting to ease restrictions imposed to contain the spread of the virus. Malaysia, the world's second biggest producer of palm oil, this week allowed most businesses to reopen.
Palm oil exports from Malaysia in the first quarter of the year have plunged 25% from the same period last year, largely due to the global restrictions.
While demand is expected to bounce from this levels, it may not reach 2019 levels, Sundram said.
He said the top buyers of the edible oil found in everything from cookies to cosmetics - India, China and the European Union - will likely consume less this year compared with 2019.
"How much lesser we do not know because of the challenges that these countries are facing internally," he said.
"China is slowly picking up with the reopening of the economy... we anticipate a growth of palm oil into this market but we are not sure if it will reach 2019 levels," Sundram added.
In 2019, India, China and the EU collectively accounted for nearly 50% of Malaysia's palm oil exports, according to Malaysian Palm Oil Board data.
The slump in demand has led to rising inventories, pressuring Malaysia benchmark crude palm oil futures to plunge about 37% since January to trade at 1,975 ringgit ($458.98) per tonne, its lowest in more than nine months.
Sundram said the market can expect the affordability of palm oil to attract more buying from Vietnam, Philippines and Myanmar as they ease out of their respective lockdown.
"There will be a similar uptake in African countries that traditionally depend on palm oil as part of their food security, as well as some middle eastern countries," he said.
(Reporting by Mei Mei Chu; editing by Louise Heavens)