KUALA LUMPUR: The newly implemented reciprocal tariffs by the United States and retaliatory measures from China are expected to dampen global commodity demand, including palm oil, according to CIMB Securities.
The research firm noted that if the recent decline in crude oil prices continues, it could further pressure crude palm oil (CPO) prices. The narrowing price gap between palm oil and fossil fuels may reduce the economic viability of biodiesel, potentially weakening demand for palm-based biofuels.
CIMB maintained its average CPO price forecast at RM4,200 per tonne for 2025. However, it warned that every RM100 drop in CPO price assumptions could reduce the earnings forecasts for plantation companies under its coverage by approximately 3% to 7%.
The US recently imposed a 10% import tariff on palm oil, effective immediately, with rates set to rise on April 9 to 24% for Malaysian palm oil and 32% for Indonesian palm oil. These increases will raise costs for US buyers and may drive them to seek cheaper alternatives, such as domestically produced soybean oil.
“These tariffs are likely to prompt food manufacturers and consumers in the US to shift away from palm oil, which could benefit local soybean farmers,” said CIMB. “For those unable to substitute palm oil easily, higher input costs may result in either consumer price increases or margin compression.”
In 2024, Malaysia exported 191,000 tonnes of palm oil to the US — accounting for around 10% of the US’s total palm oil imports and just 1.1% of Malaysia’s total exports.
CIMB also highlighted a potential upside scenario: China could reduce soybean imports from the US due to the newly imposed 34% tariff and instead increase palm oil imports to offset the decline in soybean oil availability. However, the firm cautioned that this substitution would be limited, given broader economic headwinds and trade-related uncertainties.
“China is expected to shift its soybean sourcing to countries like Brazil and Argentina, given the prohibitively high tariffs on US imports,” the note said.
Despite these developments, CIMB maintained an ‘overweight’ stance on the agriculture and forestry sector, citing minimal direct exposure of Malaysian palm oil to the US market.–BUSINESS TIMES
