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MALAYSIAN PALM OIL COUNCIL

KKDN PP 14669/05/2010 (024659)

VOL: 10 2009 MARKETING & MARKET DEVELOPMENT DIVISION

Palm Oil is Winning the Race

DIRECTOR Wira Adam MANAGER Muhammad Kharibi Zainal Ariffin kharibi@mpoc.org.my

Now, to Work on Breakthroughs in Bangladesh… AMONG all the oils and fats, palm oil is winning the race globally, insofar as production, trade and consumption are concerned. It is now the highest imported and consumed edible oil in many countries. And this is the same in Bangladesh. Palm oil outpaced soybean oil in both import and consumption in the country since 2003, bringing to an end the three-decade-long dominance of soybean oil in Bangladesh. OILS AND FATS SCENARIO Bangladesh is a land-constrained country, with about 150 million people living in an area of 147,570sq-km, where cultivable land is inadequate. Major cultivable areas are under food crops like

wira@mpoc.org.my

MARKET ANALYSTS Asia Pacific

Lim Teck Chai lim@mpoc.org.my

shrank from 525,000 hectares in 2000-01 to 401,000 hectares in 2008-09. All of these make Bangladesh more and more dependent on imports for edible oils. Palm, soybean and rape/mustard oils are the main edible oils consumed in the country. Palm oil and soybean oil are imported in crude form and refined locally. However, this year, a substantial quantity of RBD palm olein has been imported for vanaspati or vegetable ghee production. Some quantities of soybean and rape/mustard seeds are also imported for crushing locally to obtain oil. Crude soybean oil obtained from imported soybean is refined while rape/mustard oils are marketed in virgin

Desmond Ng Kok Hooi desmond@mpoc.org.my

South Asia

Fatimah Zaharah Md Nan fatimah@mpoc.org.my

Middle-East

Mohamad Suhaili Hambali msuhaili@mpoc.org.my

Africa

Nor Iskahar Nordin iskahar@mpoc.org.my

Europe

Azriyah Azian azriyah@mpoc.org.my

Americas

Ahmad Fadzli Abdul Aziz fadzli@mpoc.org.my

For more information, please contact Tel : 603 - 7806 4097 Fax: 603 - 7806 2272

import of soybean oil commenced, under Public Law 480, a food aid programme launched by US, it became the dominant edible oil. Although palm oil import was

Table-1: Total Import of Oils and Fats and for 3 Major Edible Oils, 2000-2009 In ‘000 Tonnes Year 2000

Total Oils Change & Fats (%)

Palm Oil¹

Change (%)

Soybean Oil²

Change (%)

Rape/ Change Other Oils Mustard Oils³ (%) & Fats 81.7

-

(+) 15.20

96.6

(+) 5.56

65.3

424.1

(-) 7.34

329.1

(-) 22.40

Change (%)

812.2

-

170.1

-

511.3

-

49.1

-

2001

917.8

(+) 13.0

341.4

(+) 100.71

433.6

2002

1,00.3

(+) 9.32

434.8

(+) 27.36

457.7

(+) 18.2

46.2

(-) 5.9

(-) 32.4

45.5

(-) 1.5

2003

1,087.3

(+) 8.37

524.2

(+) 20.56

2004

1,109.6

(+) 2.05

689.6

(+) 31.55

93.7

(+) 43.4

45.3

(-) 0.4

63.3

(-) 32.4

27.6

(-) 39

2005

1,086.1

(-) 2.11

826.4

(+) 19.84

206.6

(-) 37.22

29.3

(-) 53.7

23.8

(-) 13.8

2006

1,278.2

(+) 17.69

878.9

(+) 6.35

320.5

(+) 55.13

49.4

(+) 68.6

29.4

(+) 23.5

2007

1,207.1

(-) 5.56

581.2

(- )33.87

508.4

(+) 58.63

72.9

(+) 47.5

44.6

(+) 51.7

2008

1,096.8

(-) 9.13

816.0

(+) 40.40

217.3

(-) 57.26

26.8

(-) 63.2

36.7

(-) 17.5

2009 Jan.-Sept.

1,138.9

-

770.5

-

302.7

-

43.9

-

21.8

(-) 40.6

Source: MPOC, Dhaka office rice and pulses, with little land left for oilseed crops. This is why edible oil produced in the country can only meet about 10% of the demand. Besides this, available cultivable land is gradually shrinking because of expansion of habitat area and the conversion of agriculture land to industrial plots. According to Oil World, the land under oilseed crops

form to meet consumer preference for virgin oils. Rape/mustard oils are the traditional edible oils and though rape/mustard seeds are produced locally, the quantity is far from sufficient. Before the 1960s, rape/mustard oils were the dominating edible oil. But during the 60s, when the

Note: ¹Palm oil includes CPO&CPL for the period 2000-2007 and includes CPO, CPL & RBD PL for the period 2008-2009 ²Soybean oil includes only CDSBO from 2000-2003 and from 2004 onwards, it includes CDSBO and crude soybean oil obtained locally from imported soybean @18% extraction ³Rape/Mustard oils include oils equivalent of imported rape/mustard seeds@38% extraction.

Continued on page 7

MPOC FORTUNE


POC2010 8-10 March 2010

Kuala Lumpur

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MARKE T W at c h

Correction may soon be over, time to rebound and rally by Benny Lee Chief Market Strategist NextView Group In my article last month, I mentioned that the price of Crude Palm Oil Futures (FCPO) in Bursa Malaysia which was at RM2,145 per metric tonne at that time may only find support between RM2,000 and RM2,050. The price of FCPO fell to a low of RM2,013 on Oct 6 and rebounded to close at RM2,085 on Oct 9. With this close, the price of FCPO fell RM94 or 4% from a month ago. I also mentioned that once price goes to this support level, it may start to rebound and rally at least to RM2,300 in the intermediate term. Now that price is near this technical support area, there is a good chance for buying because risk is low. Exports were still declining in September. MPOB said that exports were down 9.5% on-month to 1.32 million tonnes in August but Oct 1 – 10 export estimate increased 8.3% on-month, according to cargo surveyor Intertek Agri Services. Another cargo surveyor SGS (M) Bhd estimated an increase of 3.9% to 345,393 MT as compared to 339,195 MT from Intertek. SGS said that the increase was due to increased sales to Europe, Pakistan and U.S., and continuous strong demand from China and India. Prices may not

surge sharply because Malaysia palm oil stocks are still high. The price of FCPO is still in a correction zone of a major uptrend, clearly defined by a triangle chart pattern since May this year. Price is currently below the short to long term 30 to 90-day moving averages. The averages are currently converging and this indicates that the correction may be over soon. The averages are between RM2,150 and RM2,230. Average daily trading volume has slightly reduced to 9,200 contracts last month from 10,400 contracts in the previous corresponding month. Selling pressure in the previous month has eased off. The support level of the triangle pattern may be broken in mid of September at RM2,130 but the stronger support level, like I mentioned in my previous article is between RM2,000 and RM2,050. Therefore, it is not considered as a broken support level and the correction is still intact. Currently, the support level remains at RM2,000 and the triangle pattern resistance level is RM2,300. Price is expected to reverse its uptrend if it breaks below the support level or

Mr. Benny Lee is a private trader, trainer and sought-after speaker in the financial market. He is the Chief Market Strategist for NextView Group. NextView Group is a group of companies in the Asian region that provides a leading real-time investment tool for both professional and retail investors. NextView is also a leading Investor Education training provider. For more information, log on to www.nextview.com. The above analysis and commentary is based on the writer’s personal opinion towards the price of crude palm oil using technical analysis and should not be construed as any form of investment advice. The writer will not be responsible for any decision made from using the above article. continue its uptrend if it breaks above the resistance level. Momentum indicators are slightly bullish now with RSI and Momentum indicators inching away above the middle level. The strongest sign of a bullish momentum is the MACD indicator which has just started to cross above its trigger line or its 9-day moving average. The only indicator that still indicates down trend is the ADX indicator. However, the ADX is the most lagging indicator. The weekly chart shows a bullish reversal Japanese Candlestick pattern called the “Piercing Line”. The last time the chart showed a similar bullish reversal pattern on the weekly chart was on the week of July 17 and price rallied from RM2,120 to RM2,440 in four weeks. With the current pattern, price is highly expected to rebound out of the correction zone and rally upwards.

FCPO daily chart as at 9 October 2009. Charted by Benny Lee using NextView Advisor Professional

Price is expected to at least rally the next resistance at RM2,300 and even go higher to test the next resistance level at RM2,400. If the price of FCPO is ablt to overcome these resistance levels, the price of FCPO may even rally to RM2,800, but probably not this year. The forecast is valid only if the price of FCPO stays above RM2,000 and if this support level is breached, price of FCPO may fall further to RM1,900. „

MPOC FORTUNE •  3


For more information, please contact : ICB Global Management Sdn Bhd No. 3, Jalan Sri Hartamas 7, Taman Sri Hartamas, 50480 Kuala Lumpur, Malaysia. Tel: +603 6201 6051 Fax: +603 6201 6053


M A RKE T Ins In s igh g ts

Prospects for Palm Oil in Qatar Small, yet Emerging THE people of Qatar are among the richest in the world. All due to oil and gas. Qatar has experienced rapid economic growth over the past decade on the back of high oil prices. Oil and gas have made Qatar the country with the second highest per capita income, with a surging GDP real growth rate of over 13% and GDP per capita of US$110,700 in 2008. The growth comes from its mineral oil resource, expanding economy and a growing population. Nevertheless, Qatar is 100% dependent on imports to meet domestic demands, including edible oils and fats. Contrary to the wealth created from oil reserves, the consumption of oils and fats is considerably low compared with other Gulf Cooperation Council (GCC) countries such as UAE, Saudi Arabia, Kuwait and Oman. Consumption has been increasing from 2000 to 2003 but fell from 12,800 metric tonnes in 2003 to 8,700 MT in 2007 and rebounded in 2008 to 13,000 MT, the highest in 8 years.

AT A GLANCE Second highest per capita country after Liechtenstein

The import of oils and fats in Qatar has showed some fluctuation in recent years, especially in 2007, when it dropped sharply by 6,400 MT to 11,100 MT, against 17,600 MT imported in 2006. The decline in oils and fats import in 2007 could be attributed to the sharp rise in prices that year. Despite the decline in import volume witnessed in the past two years, palm oil, which is the major oil imported, steadily dominated the local market with a 37.7% share in 2008. The other major oils imported are sunflower (19.2%) and corn (20.8%). Export of oils and fats from Qatar remain negligible as there is no local production of oils and fats in the country. PALM OIL POSITION Even though palm oil import has declined to half of the 2006 figures, the oil still commands the bulk of the Qatar oils and fats market since it took over from corn oil in 2003 as the major oil imported. The

Graph 1: Import Trends of Oils and Fats in Qatar (Year / MT) 9,000 8,000 7,000 6,000 5,000

6 2 007 200 8

4,000 3,000

200

2,000

Palm

Sun

Corn

Palm oil has become the most preferred oil in this country, besides corn oil. Yet, like other Middle East countries, corn oil is widely marketed as cooking and frying oil for household and industrial uses, whereas palm oil is mostly used for manufacturing of local margarine, vegetable ghee and shortening.

Rapeseed

Butter

Imported 1,088 MT of Malaysian palm oil in Jan-Sept 2009, three times more than same period in 2008. Palm oil most consumed is RBD Palm Olein. Cooking Oil & Vegetable Ghee most imported.

total import of palm oil, mainly from Malaysia and Singapore, was 4,900 MT in 2008. As the major oil imported, the average market share of palm oil in Qatar was 43.6% for the period of 2004-08. Of the palm oil imports into Qatar, 60% is for industrial consumption – for the snack food sector and restaurants. The balance is used as domestic general purpose cooking oil, with some of it blended with other soft oils for the local market. Even though the export of Malaysian palm oil and its derivates to Qatar is small, it has showed positive movement and has increased tremendously from only 262 MT in 2000 to 1,653 MT in 2008. In fact, Malaysia has always been a supplier of oils and fats to the Qatari market. Based on statistics released by Malaysian Palm Oil Board (MPOB), besides palm oil, Qatar also imports palm-based finished products such as vegetable ghee or vanaspati, shortening and margarine from Malaysia for its bakery and confectionery sector. Despite the shrinkage in export volume of palm oil to most of the major importing countries in the Middle East due to the global economic turmoil this year, Qatar has remained steady in its palm oil intake, indicating the strong financial capacity of the country and its people.

200

0

42 005

1,000

income

Continued on page 15

Table 1: Export of Malaysian Palm Products to Qatar (Year / MT) 2000

2002

2004

2006

2008

2009*

Palm Oil

94

42

265

103

1,102

1,088

Oleochemicals

17

0

0

18

54

54

Finished Products

151

172

97

131

497

242

TOTAL

262

214

362

251

1,653

1,384

Source: MPOB, *Jan-Sep MPOC FORTUNE •  5


M A RKE T Ins In s igh g ts

Oleochemicals in Rubber and Plastic Industries Widening Application Potentials in China WHILE the bulk of the oils and fats is China is being used for food production or processing, their application in oleochemicals production, though not new, is rather small. However, with greater demands for eco-friendly products emerging, not only in developed nations but in fast developing countries like China as well, the demand for oleochemicals has been gaining momentum in recent years. These days, eco-friendly products have become an integral part of the national economy. Products from rubber and plastics, which are very much in consumer demand in China, are now poised to take up a lot more oleochemicals.

USE OF OLEOCHEMICALS IN RUBBER AND PLASTICS PRODUCTS Oleochemicals are useful in various rubber and plastic products as raw materials for the synthesis of polymer and its by-products and as processing agents. Some of the applications of oleochemicals and their derivatives as raw materials in rubber and plastic products are shown in Table 1. Besides making them “greener”, oleochemicals improve both the processing technology and the performance of rubber and plastic products through various functional auxiliaries to meet the higher requirements now demanded of end

Table 1: Use of Oleochemicals in Rubber and Plastic Products Category

Plastic products

Auxiliaries

Oleochemicals applied

Lubricant

Fatty acid and its dicarborxylic ester, glyceride and fatty acid ester of short chain alcohol, stearic acid, fatty acid amide, metallic soap, low polymerized fatty acid ester, fatty acid ester of long chain alcohol and plastic film

Plasticiser stabiliser

Fatty acid ester dimer: 1. Derivatives of fatty acid, fatty acid metallic salts are an excellent stabiliser for polyvinyl chloride 2. Epoxy-fatty acid ester: plasticiser for PVC 3. Fatty acid ester dimer: plasticiser for PVC

Plasticiser

Fatty nitrile: plasticiser for synthetic rubber Fatty acid ester dimer; fatty acid dimer polyester rubber can be used as sealing ring

Vulcanising agent

Phosphate: to be added in natural rubber, synthetic rubber, stearic rubber and renewable rubber to soften, disperse and enhance vulcanisation and avoid aging

Softening agent

Fatty acid ester dimer: fatty acid can improve the performance of rubber products, being used as softener, in pigment dispersement and as vulcanisation enhancer.

Rubber products

6 •  MPOC FORTUNE

products. Take the processing of artificial leather as an example. Applying oleochemicals with varying contents of fatty acid in surface, foaming layer or different oleochemicals as cross-linking agents, cross-linking accelerants, solidifying agents, colourants, antifoaming agents or flatting agents to achieve various functional targets for softness, air permeability or water resistance gives artificial leather a better feeling than natural leather, a more “fashionable” taste and better quality. For plastic products, the application of oleochemicals is mainly in polyvinyl chloride goods, which account for a third of the plastic products produced in China. In 2007, China’s PVC output totalled 9.71 million metric tonnes, of which 61 per cent formed solid products, mainly shaped materials, pipeline materials, pipeline parts, boards and bottle packaging, while soft products made up 39 per cent, mainly as film, artificial leather, shoes and wires. In the past three years, more than 70 per cent of plastic auxiliaries have been applied to polyvinyl products (Table 2). APPLICATION AND DEVELOPMENT OF RUBBER AND PLASTICS AUXILIARIES INDUSTRIES The development of rubber and plastic auxiliaries took place simultaneously with rubber and plastic products. There now are more than 1,000 enterprises manufacturing plastics auxiliaries, and more than 100 enterprises involved in rubber auxiliaries. The consumption volume of the rubber and plastics auxiliaries is around 8-10% of their product outputs (Table 3). There are various auxiliaries applied in the plastics processing industry, including plasticiser, stabiliser, antioxidant, flame retardant, antistatic agent, foam booster, mold preventive, colorant, coupling agent, lubricant and mould releasing agent. The breakdown of the application of plastics auxiliaries in 2007 are as shown in Figure 1. Plasticiser production is the leading application, occupying 60% of total plastics auxiliaries consumed in China. Besides being applied locally, the advanced development of the plastics auxiliaries industry in China has seen some of the products being exported, because of quality matching those from developed nations. Besides the improvement in quality as a result of commitment to high efficiency, the Continued on page 9


MARK ET I ns nsights

Palm Oil is Winning the Race Continued from page 1

initiated in early the 70s, it started to gain strong footing only after the setting up of local palm oil refineries in the 90s and consolidated further with the establishment of an MPOC Office in Bangladesh in 1995. In fact, the import and consumption of palm oil attained a steady growth from 2000 and has retained the top position since 2003. Tables 1 and 2 depict palm oil import and consumption respectively in Bangladesh. As shown in Table 1 and Table 2, the import and consumption of palm oil increased steadily from 2000, but the growth slowed in 2007, when the price of palm oil was comparatively higher than that of Crude Degummed Soybean Oil (CDSBO). Today, palm oil enjoys the strong support of consumers in Bangladesh and it is very likely that demand for this oil in the edible oil market will grow further. However, there

Now, to Work on Breakthroughs in Bangladesh…

CDSBO and CPL widened in favour of CPL and the import of palm oil jumped to 815,955 MT.

will grow further in tandem with population growth, improved purchasing power and urbanisation.

Duty Structure Until June 1995, CDSBO was enjoying duty benefit over CPL & CPO. Through a series of negotiations initiated by MPOC, the duty disparity between CDSBO and CPL/CPL was removed in June 1995. Since July 2007, there has been no import duty on CPO, CPL and CDSBO. So long as this equal treatment persists, the import of palm oil will grow – provided its price remains competitive. Since December last year, RBD Palm Olein (RBD PL) has also been allowed to be imported, at zero import duty, as raw material for vanaspati.

Local Production Growth in local production of edible oils due is limited. But the demand for edible oils will continue to increase with the population growth, coupled with the people’s improved economic well-being, which will favour the import of edible oils, especially palm oil.

Image Issue After the establishment of MPOC Dhaka Office in 1995, various programmes have been undertaken to strengthen the image of palm oil from being the second edible oil

POSITION OF MALAYSIAN PALM OIL Malaysian palm oil (MPO) has always been favoured by the Bangladeshis, until 2000, when its import dropped by 50% because of the imposition of a 5% export duty by the Malaysian government on CPL. The remaining 50% was imported from Indonesia (IPO). Following Malaysia’s withdrawal of the export duty the following year, MPO’s share started to improve and rose to 56% in 2005.

Table-2: Total Consumption of Oils and Fats and for 3 Major Edible Oils, 2000-2008 In ‘000 Tonnes Year 2000

Total Oils Change & Fats (%)

vanaspati.

Palm Oil

Change (%)

Soya Oil

Change (%)

Rape/ Change Other Oils Mustard Oils (%) & Fats

Change (%)

906.3

-

193.7

-

496.1

-

141.4

-

75.1

-

2001

1007.0

(-) 11.11

375.6

(+) 93.91

408.5

(-) 17.66

2002

1049.2

(+) 4.19

427.5

(+) 13.82

441.2

(+) 8.00

150.1

(+) 6.15

72.8

(-) 3.06

107.7

(-) 28.25

72.8

0

2003

1105.9

(+) 5.40

517.1

(+) 20.96

395.0

2004

1130.2

(+) 2.20

622.4

(+) 20.36

340.8

(-) 10.47

124.2

(+) 15.32

69.6

(-) 4.40

(-) 13.72

113.0

(-) 9.02

54.0

(-) 22.4

2005

1226.9

(+) 8.56

853.7

(+) 37.16

235.5

(-) 30.89

2006

1297.5

(+) 5.75

857.2

(+) 0.41

280.5

(+) 19.11

84.3

(-) 25.40

53.4

(-) 1.11

96.8

(+) 14.83

63.0

(+ )17.9

2007

1400.2

(+) 7.91

778.5

(-) 9.18

452.2

(+) 61.21

102.9

(+) 6.30

66.6

(+) 5.71

2008

1369.1

(-) 2.22

956.0

(+) 26.65

238.6

(-) 47.24

105.4

(+) 2.43

69.1

(+) 3.75

Source: Oil World are some key factors tied to the continued import of palm oil. Price Situation This factor is important, for Bangladeshi consumers are price-sensitive. The buying capacity of the majority of consumers is low and when palm oil price becomes high in the international market, especially if the price difference between soybean oil price and palm oil is narrowed, and vice-versa, their buying capacity drops. This happened in 2007, when the C&F price of Crude Palm Olein (CPL) became equal to, and sometimes even higher, than that of CDSBO. This resulted in a drastic drop in the import of palm oil that year, to 581,183 metric tonnes from 878,908 MT in 2006. In 2008, the C&F price difference between

to becoming the oil of choice. As a result, palm oil’s image has been improved to a certain extent, but much remains to be done to ensure users are truly aware of the advantages of using palm oil. Growth of Food Industries and Restaurants A large portion of palm oil is being used by food industries and restaurants in Bangladesh. The growth of the biscuit and bakery sectors, fried snacks and noodles, as well as the opening of many restaurants in the past few decades, have boosted the import and consumption of palm oil in the country. The vanaspati industry is the single largest sector consuming palm oil in Bangladesh – an average of 150,000 MT annually as raw material. Such industries

Another milestone was achieved when RBD Palm Oil was allowed to be imported at zero duty as raw material for vanaspati since December last year. This year has not been good, for the import share of MPO by Bangladesh fell to a mere 12% during the Jan-Sept period, with the remaining palm oil coming from Indonesia. These are the reasons for the dwindling of the MPO import: • Lack of active and steady presence of MPO suppliers; • Aggressive marketing strategies of the IPO suppliers; and • Competitive price of IPO. Continued on page 15

MPOC FORTUNE •  7


M ARK ET I ns nsights Continued from page 6

Oleochemicals in Rubber and Plastic Industries Widening Application Potentials in China

industry is expected to witness consolidation with the number of large scale enterprises booming, increased production facilities and the setting up of new eco-friendly auxiliaries. For example, the efficiency of epoxy-soybean oil plasticiser doubled, with output increasing from 40,000 MT in 2003 to 240,000 MT. At the same time, the proportion of non-phthalic ester plasticiser increased from 20% in 2003 to

demand for functional auxiliaries and oleochemicals has increased. STATUS OF RUBBER AND PLASTICS INDUSTRIES IN CHINA The rubber and plastics processing industries together make up a huge industrial system composed of synthetic resin, rubber, auxiliaries and addictives, machinery and mould manufacturing as well as related research institutes, with product processing as its core business.

Table 2: Application of plastics auxiliaries in polyvinyl chloride products (‘000 metric tonnes) 2006 2007 2008 Products Auxiliaries Products Auxiliaries Products Auxiliaries Output of PVC and application of plastic auxiliaries Proportion (%)

9,180

1,800

9,710

2,000

8,810

1,580

32

76

29

77

24

72

Table 3: Output of Rubber, Plastic Products and their Auxiliaries (‘000 metric tonnes) 2006 2007 2008 Products Auxiliaries Products Auxiliaries Products Auxiliaries Plastic

28,240

2,350

33,020

2,600

37,130

2,800

Rubber

4,470

450

5,980

560

5,990

520

35% in 2007, which is expected to reach 50% in the coming 3 to 5 years. As for rubber auxiliaries, there are currently more than 200 rubber auxiliaries that are being used in producing rubber products. Among these auxiliaries are vulcanising agent, vulcanizing accelerant, anti-aging agent, strengthening agent, softening agent, plasticiser, filler and of late, newly developed thickening resin, peptizer, dispersement agent, cross-linking agent and anti-vulcanisation reducing agent. Among rubber products, rubber auxiliaries output has increased from 4% of the total rubber products in 2000 to 10% in 2007. Prior to China’s accession to WTO, the rubber auxiliary output was less than 30,000 MT, and it skyrocketed to 150,000 MT in 2 years after China’s accession. In fact, the manufacturing capacity of rubber auxiliaries reached 500,000 MT in 2007. The increase in the proportion of rubber auxiliaries in the rubber products sector indicates 2 issues: an increase in rubber products categories and the change of structure of functional rubber products; and that the

If taking the rubber and plastics processing industries as a whole, its gross output value reached RMB1.37 trillion, making up 4.57% of China’s GDP. Figure 1: Applications of plastic auxiliaries

Plasticizer 59% Heat Stabilizer 13% Flame retardant 11% Impact or processing modifier 7% Foaming agent 5% Lubricant 3% Antioxidant 1% Other 1%

Currently, there are over 60,000 enterprises engaged in plastics processing. The output of plastics in 2008 totalled 37.14 million MT, an increase of 10% over 2007. This gives an industrial gross value of RMB963.84 billion, an increase of 20.86%. The major plastics products include plastic pipelines, special shaped materials, synthetic leather, woven bags, film, shoes, sheet materials, foam, packaging boxes and daily use plastic products (Figure 2). As for rubber products, the gross output value in 2008 reached RMB410.27 billion, an increase of 20%, while the consumption of rubber was over 5.9 million MT. These rubber products comprise tyres, rubber shoes, rubber boards, pipelines, belts, renewable rubber, rubber parts, latex products, daily use and medical products. According to the national statistics, the gross output value of the rubber industry in 2000 was just RMB70 billion. An overview of the consumption volume of rubber and plastics products in China in the past 9 years is shown in Figure 3 The industrial base for plastics and rubber manufacturing plants in China are mainly located at the southeastern region, in the provinces of Guangdong, Zhejiang, Jiangsu and Shandong. In 2008, the output of plastics products in these four provinces totalled 23.77 million MT, which is 64% of China’s total output. Guangdong mainly focuses on products like plastic tubes and accessories, plastic packing Continued on page 13

Figure 2: Breakdwon of Various Plastics Products Output Value

Plastic film 16% Plastic thread and woven products 13% Plastic pipelines 12% Plastics for daily use 11% Plastic board 10% Plastic packaging box and containers 5% Foaming plastics 5% Artificial leather and synthetic leather 5% Other 23%

MPOC FORTUNE •  9


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MA RKE T Ins In sigh g ts

6th GOFF A Runaway Success And The American Palm Oil Industry Must Pay More Attention VERY fruitful. That will best describe the 6th Global Oils and Fats Forum held in the United States on October 5 and 6, this time in the historic city of New Orleans, a major US port and the largest city in the State of Louisiana. The 6th GOFF attracted many great speakers, with sessions chaired by equally eminent people in the Malaysian Palm Oil Industry. Check out these presentations under the 6th GOFF site in at www.mpoc.org.my. You will surely be impressed. The two-day session at the JW Marriott Hotel saw the presentation of 19 working papers, followed by lively discussions amongst the 150 highly enthused participants. Malaysian Palm Oil Council’s Chief Executive Officer Tan Sri Datuk Dr Yusof Basiron in his paper stresses Malaysia’s commitment not only to food security but also sustainability. He points out that oil palm cultivation is planet friendly as it is grown on legitimate agricultural land. In Malaysia, permanent forests form 56% of total land devoted to wildlife habitat and biodiversity conservation. Oil palm cultivation therefore does not cause deforestation or loss of wildlife and habitat and further, responsible agricultural and land management policies that minimise the generation of wastes and pollutants are practised. Oil palm is a suitable crop for tropical developing countries and for Malaysia, it is a major revenue earner, with palm oil accounting for 10% of total export earnings, besides eradicating poverty among the rural poor. Further, Tan Sri Dr Yusof points out, palm oil biofuel is “green” biofuel, with the LCA GHG emission savings definitely exceeding the 35% threshold value of the EU Directive. Thomas Mielke Germany-based Oil

of Hamburg, World in his

presentation argues that low world stocks will raise dependence on South American soybean and palm oils. While dry weather linked to the El Niño in May to September 2009 may slow the output of oil palm, the consequent lower growth in rapeseed and sunflower oils will also raise greater dependence on palm and soybean oils. Mielke also points out that oil palm is a far more sustainable crop. It takes up 6% of the global area under oilseeds, but produces 38% of the world’s vegetable oil output. Palm oil yields per hectare are much higher than soybean and rapeseed oils. In Malaysia, the yield is 4.5 tonnes per hectare while in Indonesia, it is 3.8 tonnes per hectare of palm oil. However, for soybean oil, it is 0.53 tonne per hectare in the United States and 0.51 tonne per hectare in Brazil, while for rapeseed oil, it is 1.3 tonnes per hectare in much of the European Union and 1.6 tonnes per hectare in Germany. James Fry of London-based LMC International says vegetable oil prices as a whole, and most agricultural commodity prices in general, have today become linked to energy markets by biofuel demand. In recent months price relativities between oils and fats have been responding to new realities. Vegetable and crude oil prices have been linked for the past three years and when vegetable oil prices rise too high, biodiesel (and therefore vegetable oil) use is reduced very quickly. The biodiesel industry seems to be learning more about the substitutability of different oils in biodiesel manufacture. In the US, biodiesel demand is not synonymous with soybean oil use, just as it is in the EU, where processors do not confine themselves to rapeseed oil. Substitution in biodiesel, food, feed and oleochemical applications plays a major role in ensuring that the prices of different

oils and fats are linked to one another. For this reason, non-tariff barriers, like those proposed in the EU against palm oil in biodiesel use, act mainly as an irritant, since palm oil substitutes for other oils in food and other uses. In the same context, Fry adds, it is ironic that biodiesel use has helped the EU to by-pass the efforts to keep out genetically modified (GM) oils. Within the spectrum of prices, not everything has behaved quite the way one might have expected and if one did no more than look at the relativities between soybean oil and other oil prices, one would never guess that soybean supplies are tight. Another puzzle is that in the US, which is importing increasing amounts of palm oil, its prices remain stubbornly US$40 to US$50 above those in the EU. The EU policy of not blocking GM oils has allowed the import of soybean and canola oils, with the prices reflecting this. The policy change that Fry believes would do most to disrupt the new-found link between mineral and vegetable oil prices would be if countries around the world opted for strict mandates on biofuel use, rather than policies that retain a price incentive. However, many governments feel it is not good policy to allow food prices to be driven up excessively high just to meet an arbitrary biodiesel mandate. Nevertheless, Fry adds, a price band has been established linking vegetable and mineral oil prices. Instead of stocks acting as the main driver of prices, the Brent crude price band is now the major influence. And, would you have guessed that just 8 edible oils made up 80% of the global production of 17 oils and fats last year? Or that the amount of palm oil, including crude and palm kernel oil, produced during this period was 30%? Go further into the presentation by Dato’ Sabri Ahmad, Chairman of the Malaysian Palm Oil Board (MPOB), for details. And among them, the compulsory labelling of trans fats in the United States and plans for increased usage of biofuel. Dato’ Sabri points out that MPOB’s Code of Practice for the entire oil palm supply chain that ensure consistent quality, food safety and compliance with international standards as well as PORAM’s Standard Trading Specification for processed palm oil have contributed to palm oil’s wider use by the US food industry and greater acceptance as a replacement for trans fat. Continued on page 12

MPOC FORTUNE •  11


M A RKE T Ins In s igh g ts

BREAKING NEWS!

Brazil to Implement 5% Biodiesel Mix in January FURTHER to increasing the percentage of biofuel in diesel from 3% to 4% in July this year, the Government of Brazil has decided to raise the biofuel blend in diesel to 5% from January next year. This brings forward the mandatory blend of 5% biofuel to three years ahead of schedule. As highlighted in Volume 7 of Fortune, Brazil started using a 4% biodiesel mix in diesel sold at the pump, called B4, in July. However, the huge production capacity and dependence on imported diesel led the government to bring forward the 5% mandatory blend from 2013 to 2010. This mandatory B5 application is expected to increase biodiesel consumption in Brazil next year to 2 billion litres, from 1.4 billion litres currently. As the country also exports biodiesel, mainly to the European market, the total production of biodiesel will be

raised from 1.8 billion litres to 2.4 billion litres next year. The decision to increase the blend comes as good news for local biodiesel producers as more than half of Brazil’s 4-billion-litre biodiesel production capacity will be underutilised if the country holds on to the 4% mandatory blend for next 3 years. As of now, 43 biodiesel plants are operating in the country. The other good news is that local farmers will benefit from this development as the demand for soybean oil, the major feedstock for biodiesel production in Brazil, will increase significantly. The additional demand for biofuel is expected to require more than 500,000 metric tonnes of soybean oil, leading to competition for Brazilian soybean both in local and international markets. While Brazil will continue to expand its soybean

MARK ET I ns nsights

(Nutrition) Dr K.C. Hayes advises that balancing one’s fat and protein intake will keep the body weight stable.

Continued from page 11

6 GOFF A Runaway Success And The American Palm Oil Industry Must Pay More Attention th

Another “must read” paper is that by Andrew Bunger of Fuji Vegetable Oil Inc, who touches on the trans fat-in-food scare in the US. He says food outlets are doing away with trans fats through various means. Moves like extra processing add to the cost and he suggests that raw materials are readily available: one of the best, easy solutions to replacing trans fats in frying applications is simply to switch to high oleic oils such as palm oil. 12 •  MPOC FORTUNE

production, the additional demand for biodiesel will cut down the quantity available for export next year by an estimated 2.9 million MT. Desmond Ng

Bunger also points out that in 2006, New York City was one of the first large US metropolitan areas to ban trans fat in restaurants. The ban took full effect in July 2008. Also, a citizens petition has been submitted to the US Food and Drugs Administration that wants all partially hydrogenated vegetable oils to be banned from use in food in the US. More for the health-conscious: Brandeis University’s Professor of Biology

Laboratory tests done on mice, he says, show that adipose increases as protein decreases. But there is danger in high fat or high protein intake, as this may promote insulin resistance, Hayes cautions. A warning on diabetes? Those in the industry may also want to pay special attention to the presentation by the Roundtable on Sustainable Palm Oil (RSPO), titled Promoting the Growth and Use of Sustainable Palm Oil. Demand is going to exceed supply! Also, check out the US Biodiesel Industry Outlook by J. Alan Weber of National Biodiesel Board which is the coordinating body for research and development for the industry in the US. To learn more, go to the 6th GOFF site at www.apoc.com and the MPOC website at www.mpoc.org.my.


MAR K ET I ns nsights

Oleochemicals in Rubber and Plastic Industries Widening Application Potentials in China

Continued from page 9

Figure 3: Consumption of Plastic and Rubber Products

40,000 35,000 ('000 MT)

30,000 25,000 20,000 15,000 10,000 5,000 0

2000

2001

2002

2003

2004

Plastic boxes and containers, plastics for daily use and others, accounting for 22.6% of the total output nationwide. The output from Zhejiang makes up 21.7% of the total plastics output nationwide, among which plastic films make up 31% and artificial/synthetic leather 37% of the national total. As for Jiangsu, the output of foaming plastics accounted for 31% of nationwide output while Shandong province championed the production of agricultural film, which also contributed 31% of the national total. Liaoning is one of the leading manufacturing bases for plastic shaping materials. As for rubber production, half of the 3,000 medium- to large-scale manufacturers are located in Jiangsu, Zhejiang, Shandong and Guangdong provinces. POTENTIAL APPLICATION OF OLEOCHEMICALS IN RUBBER AND PLASTICS PRODUCTS China’s oleochemical industry has been developing rapidly in recent years. According to the statistics, almost 50% of fatty acids are applied in rubber and plastic products. The output of plastic products increased 10% in 2008 but the sale value has increased 20% at the same time. Furthermore, the output value of new products also saw tremendous increase at 31% during the same period. As for rubber, the total output value registered an increase of 20%. These developments indicate that the products structure has been adjusted with increasing technical content and added value. Such evolution and promotion of new materials and new technologies require higher value-added products, which was where oleochemicals and their derivatives came in.

2005

2006

2007

2008

Rubber In year 2000, the output of plastics products was 10.36 million MT, to which 80,000 MT of fatty acids were applied. In 2007, 2.6 million MT of plastics auxiliaries, of which 1.53 million MT were

In coming years, rubber, plastics products and their auxiliaries and oleochemical sectors will develop towards energy-saving, eco- and environmental-friendly, clean production. Industrial projects supported and encouraged by the Chinese government are expected to undertake an overall upgrade in the industry chain as well as in technologies, which means a related development of oleochemical raw materials which are eco-friendly and functional for special uses will also be required. The projects listed in Table 4 clearly indicate the enormous potential of these projects and markets. In general, these projects are aimed to make rubber and plastics products more eco-friendly and hence more natural raw materials have to be applied. For instance, the gradual increase in application of natural polymer in rubber and plastics products will definitely require more renewable materials such as oleochemicals. With the composing of rubber and plastic plastics with

Table 4: Potential Application of Oleochemicals in Technological Advancement Projects in Plastic and Rubber Industry No

Projects and fields supported and encouraged by government

1. 2.

Development of biodegradable plastics products Development and production of plastic water-saving devices and multi-layer films for agricultural purposes Development and production of new, eco-friendly packaging materials (easily degradable, recyclable and reusable) Development and manufacturing of new plastic insulating panel, plastic pipelines with big diameter (0.5m and above), ultra-low noise drainpipes, anti-leaking geomembrane, plastics for medical use Development and production of aqua- and eco-friendly synthetic/artificial leathers as well as post-decorating materials Production of new biochemical products, fine chemicals for special use, and membrane materials Development of advanced technology for synthetic rubber, synthetic latex, thermo-plastic elastomer, manufacturing of new products Composite materials, functional polymers, production of low-cost engineering plastics and new plastic alloys Development of new auxiliaries for resin processing, new absorbent, super performance addictives and formulation technology Production of high performance radical car tyres and necessary materials, equipment Development of key techniques to produce intermediates of PU-based on natural oils/fats to replace harmful materials

3. 4.

5. 6. 7. 8. 9. 10. 11.

plasticisers, were applied to the 33.02 million MT of plastics products. The proportion of fatty acid-based oleochemicals in plastics products increased by 5.7% from 33% since 2000. As for rubber, 60,000 metric tonnes of fatty acids-based oleochemicals were applied to the 2.54 million MT consumed in the country. By 2008, the application of fatty acid-based oleochemicals doubled over that in 2000.

renewable materials to develop bio-degradable, eco-friendly, high quality, low energy consumption and high-tech content products, there should be more room for expansion of oleochemicals in the rubber and plastics Desmond Ng industries. “Edited from paper presented by Feng Shujun at the 2009 Sino-Malaysia Oleochemical Conference”

MPOC FORTUNE •  13


MAR K ET I ns nsights

Palm Oil is Winning the Race Continued from page 7

WAYS TO IMPROVE MPO’S IMPORT SHARE The import share of Malaysian palm oil in Bangladesh can be regained by addressing these issues: • MPO suppliers need to ensure an active presence in the Bangladesh market and establish strong links with importers and refinery owners; • Malaysian investors should look into setting up a bulk offshore storage facility in Bangladesh, which would be a great advantage for local refinery owners who would prefer to buy from such a facility to avoid the hassle of import; and • Malaysian investors should also consider setting up refineries in joint venture, which will ensure the use of MPO only as the raw material.

Now, to Work on Breakthroughs in Bangladesh…

another step in the right direction for the Malaysian palm oil industry in Bangladesh. A brief picture of the Bangladesh palm oil industry and its key players is presented in Table 3.

Table 3: Bangladesh Palm Oil Industry & Key Players COMPANY

M ARK ET I ns nsights Continued from page 5

Prospects for Palm Oil in Qatar Small, yet Emerging Todate, oils and fats consumption remain very low in the country. At an estimated 10.2kg per capita of oil consumed among the Qatari at the back of a strong economy, there is tremendous room for expansion for oils and fats uptake in the years to come. This promising and potential market that depends solely on imports for edible oils is well suited for Malaysia to explore for further development, especially since palm oil is the most consumed oil in the country. Therefore, looking at the gateways of opportunities ahead for Malaysian palm oil, Malaysian manufacturers and

Plants In Operation

Capacity /Day

Palm Olein Brand

PO Import in ’08

1,300 MT 2 Refineries 1 Dry Fractionation 500 MT

Nil

CPOL: 146,950 MT CPO: 6,000 MT % of total PO Import:18.75

2,300 MT 3 Refineries 2 Dry Fractionation 1,800 MT

NATURAL

CPOL: 98,753 MT CPO: 38,700 MT RBD PL: 6,700 MT % of total PO Import: 17.70

DADA SUPER

CPOL: 122,513 MT CPO: 6,000 MT % of total PO Import: 15.75

1,700 MT 3 Refineries 2 Dry Fractionation 1,000 MT

HILSHA & FAMILY

CPOL: 75,840 MT CPO: 49,158 MT % of total PO Import: 15.30

2 Refineries 1,300 MT 2 Dry Fractionation 1,100 MT

PURE

CPOL: 92,871 MT CPO: 9,500 MT % of total PO Import: 12.50

SHAKTI

CPOL: 17,704 MT CPO: 20,000 MT % of total PO Import: 4.60

1 Refineries 1 Dry Fractionation

Although palm oil in general suffers from an image issue in the country, on the other side, Malaysian palm oil has a very good reputation among consumers. Hence a brand of palm olein carrying the name of Malaysia will get good response from the consumers. Accordingly, Malaysian joint ventures are needed to launch Malaysian palm oil brands in the country, which would greatly contribute to strengthening the image of palm oil in general. For MPO to make a breakthrough in Bangladesh, interaction between suppliers and investors with local refinery owners and importers, as well as new entrepreneurs, is vital for it will provide

The coming POTS in Dhaka on 12 December 2009 will be an opportunity for such interactions to take place and business matching to flourish.

1 Refineries 1 Dry Fractionation

500 MT 300 MT

450 MT 300 MT

1,000 MT 2 Refineries 2 Dry Fractionation 1,000 MT 1 Refinery 1 Dry Fractionation

150 MT 120 MT

CPOL: 57,589 MT CPO: 5,000 % of total PO Import: 7.70

Nil

CPOL: 40,327 MT CPO: Nil % of total PO Import: 5.0

Nil

Figure 4: International Price of Major Vegetable Oils (Jan-Oct 27, 2009) Table 2: Malaysian Palm Products Export Performance (07 v 08 / MT) Product Group

Product

(i) PALM OIL

RBD Palm Oil RBD Palm Olein Cooking Oil Total (MT) Total (RM Million)

0 108 0 108 0.4

21 845 237 1,102 3.5

(ii) OLEOCHEMICALS

Palmitic Acid Stearic Acid / Stearic Acid Flakes Soap Noodles / Stock / Blend Total (MT) Total (RM Million)

0 18 20 38 0.1

36 18 0 54 0.2

(iv) FINISHED PRODUCTS

Vegetable Ghee / Vanasphati Margarine Shortening Vegetable Palm Oil Total (MT) Total (RM Million) TOTAL (MT) TOTAL (RM Million)

37 0 22 0 59 0.2 205 0.7

206 36 172 82 496 1.8 1,653 5.5

MALAYSIAN EXPORT

Year / MT 2007 2008

Source: MPOB exporters should take the opportunity to explore further expansion of the market in Qatar and penetrate this small yet

emerging market to ensure Malaysia continues to be the major supplier of palm oil to Qatar. Haznita MPOC FORTUNE •  15


MPOC Offices Worldwide Malaysian Palm Oil Council (MPOC) 2nd Floor Wisma Sawit Lot 6, SS 6, Jalan Perbandaran 47301 Kelana Jaya, Selangor Tel: 603-7806 4097 Fax: 603-7806 2272 www.mpoc.org.my American Palm Oil Council Suite # 690, 21515 Hawthorne Blvd. Torrance CA 90503, USA Tel: +1 (310) 944 3910 Fax: +1 (310) 944 3544 www.americanpalmoil.com E-mail: kassim@americanpalmoil.com Contact: Mohd Salleh Kassim MPOC Africa Regional Office 5 Nollsworth Crescent, Nollsworth Park La Lucia Ridge Office Estate, La Lucia 4051, KwaZulu-Natal, South Africa Tel: +27 (31) 5666 171 Fax: +27 (31) 5666 170 E-mail: kumar@mpoc.org.za Postal Address: P.O.Box 1591 M.E.C.C. 4301, South Africa Contact: Uthaya Kumar MPOC Bangladesh 62-63 Motijheel Commercial Area, 7th Floor, Amin Court Building, Dhaka, Bangladesh Tel: +88 (02) 9571 216 Fax: +88 (02) 9551 836 E-mail: fakhrul@mpoc.org.bd Contact: Fakhrul Alam MPOC Shanghai, China Shanghai Westgate Mall Co. Ltd. Room 1610B, 1038 Nanjing Rd. (w) Shanghai 200041, P. R. China Tel: +86 (21) 6218 2085 / 6218 2513 Fax: +86 (21) 6218 1125 E-mail: teah@mpoc.org.cn Contact: Teah Yau Kun MPOC Pakistan 11 – 3rd Floor, Leeds Centre Main Boulevard Gulberg, 111 Lahore, Pakistan Tel: +92 (42) 5716 600 / 5716 601 Fax: +92 (42) 5716 602 E-mail: faisal@mpoc.org.pk Contact: Faisal Iqbal

ADVERTISING OPPORTUNITIES ®

Advertising in the Malaysian Palm Oil FORTUNE is probably one of the most economical methods of advertising. Discounts of 5%, 10% and 20% are available for placements of 3 months, 6 months and one year, respectively. For enquiries, please e-mail: fortune@mpoc.org.my or contact: Tel: 603-7806 4097 (Mr. Muhammad Kharibi Zainal Ariffin)

MPOC India S-4, New Mahavir Building, Cumballa Hill Road Kemps Corner, Mumbai 400 036 Tel: +91 (22) 6655 0755 / 6655 0756 Fax: +91 (22) 6655 0757 E-mail: bhavna@mpoc.org.in Contact: Bhavna Shah MPOC Europe Regional Office 31 Avenue Emile Vendervelde 1200 Brussels Belgium Tel: +32 (2) 7748 860 Fax: +32 (2) 7794 371 E-mail: zainuddin@skynet.be Contact: Zainuddin Hassan MPOC Cairo 3 Gamal E1-Din Afify Street, Nasir City Zone No.6, 11371 Cairo, Egypt Tel: +20 (2) 2273 8108 Fax +20 (2) 2273 8106 E-mail: kazmi@mpocegypt.com Contact: Kamal Azmi MPOC Istanbul Guzel Konutlar Sitesi Dilek Apartment Daire 3 Balmumcu, Besiktas - Istanbul, Turkey Tel: +90 (212) 2668234 Fax +90 (212) 2668236 E-mail: haznita@mpoc.org.my Contact: Norhaznita Husin


MPOC Fortune - Vol10 October 2009