PETALING JAYA: Malaysia’s prior export advantage, stemming from the anticipated 32% US tariff on Indonesian palm oil, has been significantly reduced following a last-minute trade agreement that lowered Indonesia’s tariff to 19%, says Phillip Research.
The research house said Malaysia and its 25% tariff, which remains under negotiation with the United States, now faces a disadvantage, which could strain longer-term export growth to the United States and potentially reverse recent gains.
Citing independent analysts Oil World, Phillip Research said that Malaysia’s share of US palm oil imports for the eight-month period from last October to this May increased to 15% from 6% during the corresponding October 2023 to May 2024 period, while Indonesia’s share declined to 83% from 90%.
“These gains, largely the result of temporary tariff arbitrage, may be difficult to sustain as Indonesia restores its cost competitiveness,” the research house said.
However, despite concerns over higher tariffs, the research house noted that the United States represents a small 1% to 3% of Malaysia’s total palm oil exports.
Last year, Malaysia exported 191,231 tonnes of palm oil to the United States, accounting for 48.1% of the total 397,961 tonnes shipped to the broader Americas.
The research house said, among companies under its coverage, IOI Corp Bhd and SD Guthrie Bhd each derived 1% of their sales from the United States, while Kuala Lumpur Kepong Bhd’s exposure was marginally higher at 2%.
“These exports typically serve specialised and high-value applications with limited substitutes, which should help maintain relatively steady demand,” it added.
By comparison, Indonesia exported 8% of palm oil to the United States last year, signalling a comparatively higher sensitivity to changes in US trade policy.
Phillip Research said the United States accounts for merely 2.4% of global palm oil consumption, suggesting that tariff changes will have minimal impact on overall global trade flows.
“Nevertheless, intensified price competition between Malaysia and Indonesia could emerge in key markets such as India and China, if Indonesia redirects volumes initially bound for the United States,” the research house said.
It maintained its “neutral” stance on the plantation sector as the United States constitutes a small proportion of market share for plantation companies.
“Sector earnings are projected to grow by 9.9% year-on-year (y-o-y) this year, supported by modest production recovery and steady prices, before declining by 3.8% y-o-y next year on expectations of softer palm product prices, cost inflation, and potentially slower output growth,” it said.
The research house maintained its 2025 and 2026 crude palm oil price forecasts at RM4,100 per tonne and RM4,000 per tonne, respectively.
“Our preferred sector picks are SD Guthrie for its diversified land holdings, strong upstream contribution, and strategic diversification into the non-food downstream segment,” the research house said.
Source: https://www.thestar.com.my/business/business-news/2025/07/18/tariff-changes-shift-outlook-for-local-planters