Palm Oil Deficient? Don't Overwrought!

Recently, the President of Indonesia announced that it will suspend the export of palm oil and related raw materials from April 28 (local time). Chinese cosmetics industry veterans said that in addition to Indonesia, Malaysia and the Philippines and Thailand are also producing palm oil. There is no need to be overwrought about the fact that Indonesia bans the export of palm oil as the shortage of cosmetics-related raw materials is impossible.

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Recently, the Indonesian president announced that it will suspend the export of palm oil and related raw materials from April 28 (local time). As the world's leading producer and exporter of palm oil, 60% of the world's palm oil is produced in Indonesia. However, there have been insufficient supply and rising prices of edible palm oil in many parts of Indonesia recently, which is to cope with the shortage of palm oil supply in Indonesia and prevent prices from continuing to rise.

According to data from the GENERAL ADMINISTRATION OF CUSTOMS.P.R. CHINA, the main importers of palm oil in China in the first quarter of 2022 are Indonesia and Malaysia, of which China imports 258,300 tons of palm oil from Indonesia, accounting for 52%, and 242,800 tons of palm oil from Malaysia, accounting for 48%.

It is understood that in the daily chemical industry, palm oil is one of the most important commodity raw materials and more than 70% of the world's personal care products currently contain one or more palm oil derivatives. The merits of palm oil abound. One lies in its relative stability at high temperatures. The second relates to the fact that it can be well mixed with other oils. And the third is its very low production cost. Therefore, palm oil is widely used in shampoos, shower gels, soaps, disinfectants and other daily chemical products. Moreover, palm oil with the function of moisturizing and regulating texture is also widely used in the cosmetics industry. Its derivatives such as alcohols, fatty acids or fatty alcohols are applied to different products due to their properties of emollient or foaming.

Since last year the price of palm oil-related raw materials has hit a record high due to the repeated global epidemics, the Russian-Ukrainian war and logistics obstructions, which has also pushed up the cost pressure on cosmetics companies. L'Oréal Group and RESUN, the supplier of Procter & Gamble, have disclosed that the prices of international crude oil, palm oil and other commodity raw materials at the end of 2021 increased by about 40% to 50% compared with the beginning of the year, with the prices of related commodities continuing to rise in the first quarter of 2022.

The Chinese cosmetics company Shanghai Jahwa also mentioned in the announcement of the main operating data in the fourth quarter of 2021 that soap particles and oil raw materials in the fourth quarter of 2021 were affected by palm oil and palm kernel oil, leading to the average purchase price rising by about $915.6 per ton (excluding tax), an increase of 100%. Due to the rise of palm kernel oil and ethylene oxide, the average purchase price of surfactants rose by about $457.8 per ton (excluding tax), an increase of about 50%.

However, DBS wrote in its research report: "We believe that given that the domestic demand in Indonesia accounts for one-third of its production, these restrictions may only be implemented for a short time." Once inventories are restored and prices are stabilized, restrictions may be lifted.”

Chinese cosmetics industry veterans also said that in addition to Indonesia, Malaysia and the Philippines and Thailand are also producing palm oil. There is no need to be overwrought about the fact that Indonesia bans the export of palm oil as the shortage of cosmetics-related raw materials is impossible. Moreover, the policy also oscillates at any time, if Indonesia's domestic supply has kept up, then the policy of banning exports may also be cancelled.