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Lack of demand from cosmetics players leads to fall in Malaysian palm oil production

By Simon Pitman+

15-Oct-2014

Lack of demand from cosmetics players leads to fall in Malaysian palm oil production

Palm oil production slumped significantly in Malaysia during September, as demand from a host of industries, including cosmetics and personal care, has continued to fall this year.

Malaysia is the second biggest producer of palm oil in the world, behind Indonesia, as latest figures compiled by news provider Bloomberg show that production fell by 11% in the country during September to 1.81 million tonnes, down from an all-time high of 2.03 million tonnes.

Bloomberg complies its figures using the median of seven estimates from planters, analysts and traders, and analysis of the results points to the fact that the slump is being underscored by a lack of demand from food and biofuel producers, as well as cosmetics players.

Where are cosmetics players going for their palm oil?

Indeed, the figures show that so far this year, demand from those three industries, traditionally amongst the biggest buyers of palm oil, has fallen by 18%.

The report underlines that one of the biggest triggers for the fall was the fact that supplies of palm oil exports from other countries in the Southeast Asian region have continued to rise during the period, closing the gap on the Malaysian shortfall caused by the food and cosmetics industries.

The news coincides with recent campaigns by animal rights and environmental groups, particularly Greenpeace, that have focused on raising awareness of the threat to both the environment and wildlife posed by reckless cultivation and harvesting of palm oil.

In the search for sustainably sourced palm oil...

Currently about 85% of the world’s palm oil comes from Indonesia and Malaysia, and with many consumer goods companies, particularly in the food and personal care arenas, under pressure to provide products containing palm oil-derived formulations from reputable and sustainable sources, the search is on for palm oil producers that can prove these credentials.

As a result, many of the leading cosmetic manufacturers, including Unilever and L’Oreal, have opted into schemes that support the sourcing of sustainable palm oil, the most high profile being the Roundtable on Sustainable Palm Oil (RSPO).

In particular pressure from the RSPO has led to a big impact on the supply chain, with palm oil producers, raw material suppliers and ingredients players having to raise their game by ensuring their processes meeting certification requirements.

Reflecting the success of this drive, GreenPalm, the certificate-trading programme for sustainable palm oil supported by the RSPO, announced in July of this year that it traded a peak-level of 11 million certificates for sustainable palm oil.

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