POINTERS: Engaging the Potential of Central Asian Palm Oil Market

For many years, the Central Asia Region has been using palm oil. Prior to 2020, Malaysia was a leading exporter of palm oil to Uzbekistan. But today the main quantities of products containing palm oil come from Russia - the country firmly established itself in the leading place. Russian group of companies EFKO is a leading exporter of specialty fats to Uzbekistan. The company made good use of the logistic difficulties in China.

Starting from 2020 Malaysian exporters began to face serious logistic difficulties. In view of current uncertainties there is no secure or guaranteed line for deliveries of oil palm products. Uzbekistan switched imports away from Flexis in favor of railway tanks. This was a new trend set by the Russian suppliers - cheaper, faster, no risk of getting stuck on the border. Substantial difference in import tariffs provide trade preferences to Russian suppliers over all others including Malaysia and Indonesia. Russian exporters pay 0% import duty when supplying palm oil to Uzbekistan, while Malaysian suppliers have to pay 100 USD import duty per each metric ton being imported to Uzbekistan.

The unequal import conditions made Malaysian companies less competitive and opened the way to big Russian suppliers like EFKO Group. Starting in 2020 Russian companies were taking control over the market rapidly. By the end of 2020 Russian share reached 39% (up from 4% in 2017) while Malaysia went down to 48% (down from 84%). In 2021 Malaysia’s share went down even deeper.

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Questions & Answers (6) :

MEGAT SYAZWAN SHAH

2 years ago

Hi, In my opinion, this is a golden time for Malaysia to strengthen its position in the Central Asia market. MPOC needs to approach all potential customers in this region now since the sanction on Russia. Other problem such as logistic issue will be solved as demand improve. Do you agree?

Aleksey Udovenko:
I totally agree with you!
2 years ago

LAW CHOON SHENG

2 years ago

Dear Dr. Udovenko Would you think the shortage of sunflower oil is going to be very short term? My reasoning is that other countries not affected by the Russia-Ukraine conflict will jump on the opportunity to grow the crop and get high prices. Since sunflower is annual and oils can be obtained very fast, within a year or so. Your views please. Thanks.

Aleksey Udovenko:
Dear Law Choon Sheng, Both countries top the list of SFO producers in the world. Both are having serious issues related to the agriculture (not limiting sunflower). Its is hard to judge but for the agriculture of Ukraine this year may become the worst in history. Speaking about Russia... Its even more complicated to speak about future of oil crops planting in Russia rather than in Ukraine. Russia imports 90% of potato seeds and almost 100% of sugar beet seeds. For sunflower seeds, soybeans and rapeseed, the volume of imports reaches 70%. If the sanctions affect this sector, Russia's agriculture will be in even more difficult conditions than Ukraine.
2 years ago

Peng Kong Law

2 years ago

Dear Dr.Udevenko, 1) What is happening to the sunflower crop that has already been grown in Ukraine? Not harvested and left to rot due to the conflict OR converted to sunflower oil and other products and consumed locally in Ukraine since cannot export out? So not wasted. Thanks.

Aleksey Udovenko:
Dear Peng Kong Law After the Russian invasion of Ukraine, a full-fledged sowing campaign is unlikely. Fighting is underway in 9 regions of the country. The logistical issue, the issue of seeds and fertilizers, remains unresolved. Sunflower planting in 2022 may be at 13-years minimum - 4.2-4.4 million hectares (-35% to 2021). Sunflower processing has been temporarily suspended. Oil exports also stopped. In October-December 2021, the volume of supplies of sunflower oil from Ukraine to the EU countries amounted to 1.52 million tons (86% of the total supply to the EU)
2 years ago

Andrey Golovach

2 years ago

Dear Dr. Udovenko In my humble opinion the main issue which Malaysia faces in Central Asia (and all other regions) is the usually uncompetitive price compare to Indonesian origin palm oil. Sanctions hurt logistic chains to Russia and through Russia for both Malaysia and Indonesia the same. Russian transit will obviously affected by sanctions as long as goods which formally bought by Kazakhstan buyer in Malaysia and shipped to a port on the Baltic Sea can settle down in Russia on local factories not reaching Kazakhstan. And the largest opportunity to win a chalange for Malaysian producers is to find the way of deliver their goods to Central Asia avoiding transit through Russia sooner than Indonesian ones can do it. China and Iran looks the most perspective ways. Do you agree? In this point of view can MPOC help the local buyers to find and establish that possible ways how to deliver goods? Thank you

Aleksey Udovenko:
Dear Andrey Golovach, Your are right. Indonesia gives a discount in most cases. But the final prices include delivery costs. In some cases costs of delivery may become a game changer. I agree with you - to win Malaysian producers must find a new way to deliver goods to Central Asia. But, I wouldn't suggest to prioritize China for transit as it may involve further risks of getting stucked along the way. Last year Chinese authorities put transit on hold. Some buyers are still waiting to receive their containers. The situation may repeat itself. Logistics today is a million dollar question. Answering the question will unlock the region for you. Not for all times, probably, but good enough for a man. Contact me by email or mobile phone aleksey.udovenko@gmail.com +79647925877 +79253008495 Find me in Messengers
2 years ago

Abd Rahman Abdullah Thani

2 years ago

May your mother be protected in Ukraine

Aleksey Udovenko:
Dear Abd Rahman Abdullah Thani My mother lives in Kharkiv. There's no place in the city where you feel safe.
2 years ago

George Teh

2 years ago

Dear Dr. Udovenko If Russian-made specialty fats which crowded out Malaysian palm oil from the Central Asian market are palm oil-based, unless Russia imports Indonesia palm oil or other palm oil producers exclusively, why would Malaysia be a loser at the macro level? Grateful for a clarification. Thank you.

Aleksey Udovenko:
Dear George Teh, Russia is a price sencitive market totaly dominated by Indonesian suppliers. There's one big company monopolist - a trend maker who's in charge of the only transshipment facility operating with bulk tankers - importing mainly from Indonesia. Thereby, in most cases palm based specialty fats coming to Central Asia are made of Indonesian palm oil. That's the story of recent month's - when Russia began to master the market of Central Asia. But I belive that we can take advantage of the current situation.In this order to be the winner we must think beyond the box. The situation is a difficult one. But those who's got ways to deliver and ideas how to transfer payments safely are the winners.
2 years ago