Malaysia’s swelling palm oil inventories are straining storage capacity in the country’s top-producing state, as a bumper harvest piles pressure on the government to clear excess supplies. Tanks in Sarawak on the island of Borneo are nearing capacity after a bigger-than-expected harvest and soaring freight costs slowed shipments, according to industry executives and planters. The state accounts for more than a fifth of Malaysia’s palm oil output. Most of that moves through Bintulu Port, which handles more than 90% of Sarawak’s exports, concentrating the glut at a crucial gateway as production surges.
Inventories across Malaysia, the world’s second-biggest palm oil producer, hit a record 3.51 million tons in September, when production also reached an all-time high — even before the seasonal output peak that typically arrives in October. The mounting glut is adding urgency to government efforts to draw down stockpiles, including a potential waiver of export taxes on crude palm oil to spur overseas sales. The oversupply is already weighing on prices. Benchmark palm oil futures in Kuala Lumpur closed lower on Tuesday after falling as much as 2.2%, the steepest drop in more than a month.
Government and industry officials met last week to discuss ways to tackle the swelling stockpiles, including measures to move excess supplies overseas, as concerns grow that storage tanks are running out of space, according to SD Guthrie President and Group Chief Executive Officer Mohd Haris Mohd Arshad. The government is reviewing proposals from the industry to address the glut, Plantation and Commodities Minister Noraini Ahmad said.
A prolonged shortage of tank space could eventually force mills to slow processing, disrupting the flow of fresh fruit from plantations and smallholders at the height of the harvesting season. “We don’t want to jeopardize the supply chain,” Haris said in an interview Friday, adding that the government must act quickly to give the industry time to plan and prepare. “The last thing we want is for farmers not to be able to sell their fruit.”
Source: Bloomberg Markets · Summarized by HeadlinesBriefing