MALAYSIA’S COMMODITY SECTOR THRIVES IN 2024 DESPITE GLOBAL CHALLENGES

By Danni Haizal Danial Donald

KUALA LUMPUR, Dec 15 (Bernama) -- Malaysia's commodity sector has demonstrated resilience and growth in 2024 despite global headwinds, supported by robust exports and favourable market dynamics.

Palm oil, a key sector for the Malaysian economy, has seen robust growth in 2024.

The yield of fresh fruit bunches (FFB) in the estates sector has improved by 8.1 per cent, increasing to 13.94 tonnes per hectare, up from 12.89 tonnes per hectare in 2023.

According to the Malaysian Palm Oil Board (MPOB), crude palm oil (CPO) prices increased by 5.5 per cent on average, reaching RM4,047.50 per tonne from January to October 2024, compared to RM3,835.50 per tonne in the same period last year.

The rise was driven by stronger export demand, a weaker ringgit enhancing affordability for buyers, and lower palm oil stock levels, which remained below two million tonnes.

Exports of palm oil and palm-based products rose 11.9 per cent year-on-year (y-o-y) to 22.30 million tonnes in the first 10 months of 2024, generating RM89.39 billion in revenue—a 14.5 per cent increase from RM78.10 billion last year.

Palm oil accounted for the largest export volume, at 14.05 million tonnes, up by 13.7 per cent compared to 12.36 million tonnes recorded in January-October 2023.

India retained its position as Malaysia’s largest palm oil market, during the period under review, accounting for 2.67 million tonnes or 19.0 per cent of total palm oil exports.

Malaysia’s victory over the EU restriction

Malaysia’s victory against the European Union (EU) over the Delegated Act, which discriminated against palm oil biofuels, marks a significant milestone for the nation’s palm oil industry.

This win exemplifies a well-coordinated effort by Malaysian ministries, organisations, and agencies.

Minister of Plantation and Commodities Datuk Seri Johari Abdul Ghani stated that the decision vindicated Malaysia’s stance and would ensure justice for biodiesel traders and employees.

On Jan 19, 2021, Malaysia initiated World Trade Organisation (WTO) dispute consultations with the EU over measures affecting palm oil and palm crop-based biofuels.

In its final report, issued on March 5, 2024, the WTO panel concluded that the EU’s Delegated Act restricting palm oil biofuels was discriminatory.

The panel found fault with the EU's use of indirect land use change (ILUC) as a basis for banning palm oil biofuels and criticised the EU’s approach to notifying and consulting with other economies before implementing new trade measures.

Postponement of EUDR 

The EU’s decision on Oct 16, 2024, to delay implementation of the EU Deforestation Regulation (EUDR) by 12 months provided a much-needed relief for Malaysia's palm oil sector.

The EUDR, which mandates that commodities sold in the EU must be deforestation-free, poses significant compliance challenges for palm oil producers.

The Malaysian Palm Oil Council (MPOC) welcomed the postponement, noting that it gives stakeholders more time to meet the complex requirements.

Compliance costs are estimated at US$650 million annually, with US$260 million directly impacting smallholders.

Johari announced that the Ministry of Plantation and Commodities (MPIC) will support and help local oil palm smallholders meet the new EUDR deadline on Dec 30, 2025.

The government will help smallholders comply in four areas, namely deforestation-free, traceability, legitimate land title, and good labour practices, he said.

However, he acknowledged that the labour shortage remains one of the most significant unresolved challenges in Malaysia’s palm oil industry.

The industry continues to rely heavily on manual labour, particularly from foreign workers, for harvesting and infield collection activities.

According to the MPOB, plantation companies currently face a shortage of nearly 38,000 workers, with harvesting and infield collection activities accounting for about 55 per cent of the total shortfall.

"The year 2024 was anticipated to be a beacon of hope for this issue, but it has turned out differently," MPOB said.

Foreign workers currently account for 76 per cent of the workforce in this sector.

Rubber

Malaysia’s rubber sector performed strongly in 2024, contributing RM24.47 billion to export revenue, which marks a 19.9 per cent y-o-y increase, according to the Malaysian Rubber Board (MRB).

This value represents 2.2 per cent of Malaysia’s total export earnings, valued at RM1.12 billion.

Natural rubber (NR) exports were valued at RM 5.54 billion, reflecting a 29.2 per cent y-o-y increase, mainly driven by higher SMR 20 prices, supported by a tight supply situation and stronger global demand for NR.

Exports of rubber products rose by 15.1 per cent, reaching RM17.43 billion, which was largely driven by a 24.1 per cent increase in rubber glove exports, which amounted to RM 11.0 billion.

The board said Malaysia’s NR production in the first nine months of 2024 amounted to 268,555 tonnes, 5.8 per cent more than 253,900 tonnes produced in the same period of 2023.

NR production in 2024 is expected to register at 350,000 tonnes, a slight increase compared to the previous year.

The Association of Natural Rubber Producing Countries (ANRPC) projects the global NR production for 2024 to reach 14.528 million tonnes, a 4.5 per cent increase from 2023, driven by improved NR prices.

Furthermore, rubber downstream activities showed positive development in 2024, recovering from declines in 2023.

From January to September, export revenue from rubber products increased by 15 per cent y-o-y, with rubber gloves showing a growth of 24 per cent. Notably, rubber gloves account for 63 per cent of total rubber product exports.

Despite these positive trends, Malaysian rubber product manufacturers, particularly those producing dry-rubber-based products, continue to face challenges, including labour issues, the need for technological adaptation, and increasing global competition.

 Government support for the rubber industry

MPIC and MRB are committed to transforming the country’s rubber industry through high-impact projects.

One major initiative is the Rubber Area Consolidation Project, which aims to utilise 420,000 hectares of currently unproductive land across the nation.

Another key initiative is the Malaysian Sustainable Natural Rubber (MSNR) project, which commenced on July 1, 2024, and was officially launched on Oct 7, 2024, by the MPIC minister. 

The MSNR project is designed to ensure Malaysia’s rubber industry meets international sustainability standards, aligning with the United Nations Sustainable Development Goal (SDG) 2030 as well as EUDR.

To enhance production efficiency and reduce reliance on labour, the industry is increasingly investing in mechanisation and automation technologies.

Integrating smart technologies and the Internet of Things (IoT) into manufacturing processes is expected to boost productivity and lower operational costs.

Additionally, the rubber industry is focused on sustainability by incorporating green technologies and processes.

There is a growing emphasis on minimising the environmental impact of rubber production, focussing on sustainable practices, reducing waste, and improving energy efficiency in processing.

Outlook for Malaysia's Commodity Sector

The outlook for Malaysia’s palm oil sector in 2025 appears promising yet competitive, particularly regarding demand, as Indonesia is expected to significantly increase its domestic consumption of CPO.

On the supply side, Malaysia continues to face challenges in restoring palm oil production to pre-COVID-19 levels, but the industry remains optimistic that output will improve.

Meanwhile, Malaysia’s rubber industry is anticipated to experience moderate growth in 2025.

This optimism is based on the expectation that excess supply in the glove market will diminish in 2024, leading to a slight increase in NR prices.

Concerns regarding compliance with the EUDR and the evolving trade policies between the United States and China will significantly influence the flow of Malaysia's NR exports in the coming years.

The average price of Standard Malaysian Rubber 20 (SMR 20) in 2025 is seen at 810.00 sen per kilogramme.

-- BERNAMA