Indonesian palm oil production under pressure from slowing global economy

Major suppliers like Indonesia are predicted to see a decline in demand for palm oil due to the slow economic growth of China and other important palm oil consumers.

According to Fadhil Hasan, chairman of the Indonesian Palm Oil Association's (GAPKI) foreign relations division, as their expansion slows down, major consumers of palm oil from Indonesia, the world's largest producer, are projected to have less demand this year. Hasan mentioned the United States, India, and the European Union in addition to China.

At the 2024 Palm & Lauric Oils Price Outlook Conference & Exhibition in Kuala Lumpur on Wednesday, Hasan stated that this will have an impact on the demand for palm oil products because there is a significant correlation between economic growth and the demand for palm oil.

China announced on Tuesday that its objective for annual economic growth in 2024 would be "around 5%," implying that it may fall short of the 5.2% mark set in 2023.

The executive director of the Socio-economic Research Center in Kuala Lumpur, Lee Heng Guie, voiced concerns about the "health of China's economy" and stated that he anticipates growth to be less than the 4.6% official target.

According to Hasan of GAPKI, Indonesia is expected to produce 54.4 million metric tons of palm oil in 2024, a marginal increase over the 53.2 million metric tons produced in the previous year. However, he projects that shipments will drop from an expected 32.2 million metric tons in 2023 to about 29.5 million metric tons.

Due to stagnating output from Indonesia and Malaysia, annual palm oil production is predicted to grow at the slowest rate in four years between 2023 and 2024, at a range of 200,000 to 300,000 metric tons, according to Mielke.