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Palm Oil Beaten by Europe, Malaysia Takes “Revenge” against China

Malaysia will increase palm oil exports to China by 500,000 tons per year. This decision was taken after Indonesia’s neighboring country faced pressure from the implementation of the Anti-Deforestation Law by the European Union (EU).

Malaysian Minister of Plantations and Commodities Fadillah Yusof said that his country was now increasing exports to China, the main importer of these commodities. “Chinese imports of palm oil and palm-based products from Malaysia will amount to 3.14 million tons in 2022,” he said, as quoted by AFP,

Furthermore, Yusof said that this number would increase at the end of this year or early next year with the additional absorption of 500,000 tons of palm oil by Beijing. This increase is the result of an agreement between the palm oil products company headquartered in Malaysia, Sime Darby Oils International, and China’s state-owned Guangxi Beibu Gulf International Port Group.

“This will definitely help Malaysia fight against restrictions imposed by Europe,” he added. “Chinese importers are purchasing high value-added palm oil downstream products produced from Malaysia.”

Yusof said that Malaysian palm oil exports to China are now estimated to reach 3.2 million metric tons in 2023. However, he said that his country has no intention of leaving the European Union, which is currently the second largest importer of Malaysian palm oil after India.

For information, the European Union (EU) Commission on December 6 2022 has formalized the Deforestation Law or EU Deforestation-Free Regulation (EUDR). The EU introduced a new law to prevent companies from selling coffee, beef, soybeans, rubber, palm oil and other commodities linked to deforestation.

Companies must prove that their supply chains do not contribute to forest destruction or be fined up to 4% of their turnover in EU member states.

Palm oil is blamed by environmentalists for fueling the destruction of rainforests in Malaysia and Indonesia, which together account for 85% of global production. This new EU regulation is very controversial in producing countries, one of which is Malaysia and Indonesia which protested against this action.

Malaysian and Indonesian officials are currently actively lobbying Brussels over the regulations, which will not come into full effect for 18 months. This is to give manufacturers time to implement compliance.

Source : CNBC