The EU Decreases Palm Oil Imports Significantly
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After a record import volume of 7.11 MMT Palm Oil in 2020, the EU reduced its imports to 5.95 MMT in 2021 and 4.97 MMT in 2022. During these three years, the most significant cuts were taken by the two leading suppliers, Indonesia and Malaysia, which together make up about two-thirds of EU imports. EU imports from the third supplier, Guatemala, steadily increased to about ten percent of the import market between 2020 and 2022. Imports from the top Palm Oil importing MS (i.e., the Netherlands, Italy, Spain, Germany, Belgium, and France) declined, except for Germany. Imports were reduced most significantly by the top three importers, the Netherlands, Spain, and Italy.
In 2022, EU Palm Oil use for biofuel production took the biggest hit, with a reduction of about 1.1 MMT. The ambition of the European Commission is to cut the use of virgin vegetable Oils for the production of biofuels and increase the proportion of used Oils, animal fats, and by-products from vegetable Oil refining. For this reason, biofuels produced from waste fats and Oils double count against the blending mandates in many MS. Palm Oil use is also affected by the phase-out of biofuels derived from high-risk ILUC (Indirect Land Use Change) crops.
According to the EU Renewable Energy Directive II (REDII) and EU Delegated Act 2019/807, the use of high-risk ILUC biofuels is capped at the 2019 level until 2023 and then phased out by 2030. Several MS have announced earlier phase-outs, namely France, Austria, Belgium, and the Netherlands. In 2021, the French State Council confirmed that biofuels produced from all Palm Oil-based products are excluded from a tax advantage. Austria, Belgium, and the Netherlands followed. Germany is anticipated to follow in 2023. Based on the phasing out of Palm Oil, its use as feedstock for biofuel production is forecast to fall further in 2023 and 2024.
Like biofuel use, the industrial use of Palm Oil fell in 2022, following the inflated use as an ingredient for soaps and disinfectants in 2020 and 2021. During 2023 and 2024, the industrial use of Palm Oil is projected to stagnate at around 1.0 MMT. The food use of Palm Oil will be expanded by about 150,000 MT to 2.45 MMT in 2022. This surge is based on the limited availability of other Vegetable Oils, combined with the attractive price of Palm Oil.
The use of Palm Oil for food use was further supported by lifting the lockdowns, which increased demand in the food service sector. In the EU, Palm Oil is widely deemed unhealthy due to its high level of saturated fat, and food manufacturers advertise the lack of Palm Oil as a key selling point on product packaging. With the increasing supply of other Oils, the food use of Palm Oil is forecast to trend down during 2023 and 2024.
In addition to perceived health benefits, sustainability certification is another important factor for acceptance in the food market. The private sectors in the Netherlands, Belgium, Germany, Italy, France, Denmark, and Sweden agreed to ensure a fully certified, sustainable Palm Oil supply in Europe by 2020. In 2021, 93 percent of European imported Palm Oil was certified as sustainable.
Palm Oil Import in the EU
According to AgFlow data, Spain, one of the vital Palm Oil importers of the EU, purchased 19,380 tons of Palm Oil from Indonesia in June 2023, followed by Malaysia (18,150 tons). Despite the lower demand this year, FAS Posts expect EU Palm Oil imports to recover slightly to 5.05 MMT in 2023, rebuilding stocks after the significant depletion reported during 2021 and 2022. A large share of the stocked volume is stored in the port of Rotterdam, where storage capacity for edible Oils is estimated at roughly 1.2 MMT. Additional stocks are pipeline stocks and stocks located in other MS. EU Palm Oil imports are anticipated to decline following the dwindling demand next year.
Other sources: USDA
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