Palm Oil has diverse usages and is apparent in several industries. On this page, we explore its primary uses, how it is traded, and which countries produce and consume the most of it.
Palm Oil Industry
What is Palm Oil?
Palm oil is an edible oil that has been extracted from the fruit of oil palm trees, specifically East African Oil Palm Trees. Nowadays, most people associate palm oil production with Indonesia and Malaysia, but these trees were originally from Africa. East African Oil Palm Trees were first introduced into Asia roughly around a 100 years ago only for decorative purposes but have now grown to be the largest production palm oil capital of the world. Malaysia and Indonesia combined makeup over 80% of palm oil production globally with vast forests full of oil palm trees.
There are 2 types of Palm Oil, Crude Palm Oil, and Palm Kernel Oil.
Crude Palm Oil is refined oil that is extracted from palm fruits that are made into vegetable oils, kinds of butter, and sometimes, animal feed.
Palm Kernel Oil is oil that is extracted from the pip or kernel of palm fruits which are then used as cooking oil and cosmetics or soaps. This variation of palm oil contains a higher saturated fat content which characterizes it as an excellent cooking oil because of its ability to maintain stability even at high temperatures. It also is a relatively affordable oil compared to other types of edible oils.
How is Palm Oil traded?
The trading of Palm Oil is carried out by local trading houses and producers that have connections with the sources. They have built and maintained supply agreements with these sources to be able to purchase the material to process or trade. Trading can happen at any stage of the palm oil process, from the raw unprocessed fruits to the finished refined edible oils.
Transportation of Palm Oil requires special steel containers that maintain the perfect temperature, light, and oxygen levels to preserve the freshness and quality of the oils during the journey.
Palm Oil Futures are actively traded on the Bursa Malaysia, the most liquid palm oil futures market on the globe. Bursa Malaysia is used by both risk management professionals and speculators/prop traders for futures and options trading.
Where is Palm Oil traded?
Malaysia and Indonesia are the 2 world’s largest producers of palm oil. Currently, the top 5 are:
- Indonesia(33.4m)
- Malaysia(19.9m)
- Thailand(1.8m)
- Colombia(1.2m)
- Nigeria(900k)
The top 5 countries that imported Palm Oil in 2018 were:
- India (5.5bn)
- China(3.4bn)
- Pakistan(1.9bn)
- Netherlands(1.8bn)
- Spain (1.3bn)
Indonesia and Malaysia are by far the two largest producers of palm oil in the world. The top 5 (in MT) are currently:
- Indonesia(33.4m)
- Malaysia(19.9m)
- Thailand(1.8m)
- Colombia(1.2m)
- Nigeria(900k)
Palm Oil is used globally in food production. The top 5 importers of Palm Oil (by USD) in 2018 were:
- India (5.5bn)
- China(3.4bn)
- Pakistan(1.9bn)
- Netherlands(1.8bn)
- Spain (1.3bn)
Who are our clients?
The majority of Palm Oil produced is used in the food industry, while a good amount of it goes into cosmetics and household items. Certain countries may utilise it as biofuel. There are often exclusive agreements between traders and food companies that negotiate lower rates and regular quantities of shipments.
