---
title: Malaysia Mulls EU Palm Export Ban
description: Starting from 1st January 2023 Indonesia has changed its Domestic Market Obligation (DMO) to 1:6 from 1:8...
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# Malaysia Mulls EU Palm Export Ban
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January 12, 2023
2 mins read
Malaysia Mulls EU Palm Export Ban
On 12th January, the Malaysian Minister of Plantation and Commodities, Fadillah Yusof, suggested that Malaysia was considering the option of banning exports of palm oil to the European Union (EU) in what market players have told Mintec is ‘revenge’ for the new deforestation regulation which will impact both Malaysia and Indonesia.
The EU’s proposal is significant, because it will ban the import of soy, palm oil and derivative products, among other commodities, which it says are linked to deforestation globally. The law mandates companies to prove with due diligence that their products are deforestation-free (not grown on land deforested after 2020), before being allowed into the EU. Companies have 18 months to follow the rules, with an extended period of six months for smaller companies.
The new policy has concerned industry participants in Malaysia and Indonesia, who suggest that proving that deforestation has not occurred is not needed and is difficult to do. Thus, some “feel the rules are completely unfair and are punishing palm oil plantations and the workers,” a Malaysian-based trader commented to Mintec.
A separate industry player told Mintec, “it’s going to be very difficult to jump through all these hoops to export palm into the EU. It may be better if the proposals go ahead and we don’t play these games anymore. The fine proposed by the EU if your product is found in breach of the deforestation terms is eyewatering. Many players may not risk exporting to the EU anyway, whether a ban goes ahead or not.”
Despite attempts by the EU to reduce palm oil usage, imports in 2022/23 increased to 5.5 million metric tonnes, an increase of 400,00 metric tonnes from the previous year, according to the USDA. This is because palm oil is used in a huge variety of products, from foodstuffs to biodeisel usage. Thus, even a proposed ban could cause palm oil prices move up 5-10% from the current levels for EU players, who may seek to acquire volumes of the material in the immediate term, thus stoking demand. The price increase may also spread to replacement oils such as rapeseed, sunflower and soy, as demand could increase as industry participants look to alternative oil usage should a ban arise.
A European trader commented to Mintec, “the EU, like it or not, still uses a lot of palm. If a ban does come into play, then there are only a handful of viable replacements. At this point, it’s a waiting game and it very well could all be talk from Malaysia, because there does seem to be a willingness to attempt to adhere to the deforestation terms. Either way, it’s going to have an impact on prices.”
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Topics: [Oilseeds, Oils & Fats](https://www.mintecglobal.com/top-stories/tag/oilseeds-oils-fats)
Kyle Holland
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