KUALA LUMPUR (Feb 25): Rising compliance costs associated with the European Union Deforestation Regulation (EUDR) could lead buyers to switch from palm kernel oil (PKO) to crude coconut oil (CNO), according to Regina Koh, a senior market reporter at Fastmarkets Palm Oil Analytics in Singapore.

Fastmarkets Palm Oil Analytics is a provider of pricing, data, news and analyses focused on the palm oil market and its derivative products. 

One of the speakers at the Palm and Lauric Oils Price Outlook Conference and Exhibition here on Tuesday, Koh observed that there was a surge in PKO exports to the EU between September and October last year. This occurred as buyers rushed to secure shipments before the initially planned end-December 2024 EUDR deadline.

“I see the EUDR delay until the end of this year providing some breathing room, and allowing for another round of inventory build-up, possibly with cheaper material. We may see another peak in crude PKO exports to the EU, but compliance costs will remain a challenge,” she said.

“That means more buyers will also look at CNO sourcing, keeping the oil's demand firm. CNO is not subject to EUDR requirements,” she added.

Both PKO and CNO are crucial sources of lauric acid, a key ingredient widely used in the food, oleochemical, and personal care industries.

The Philippines and Indonesia are the world's leading CNO exporters, while Indonesia and Malaysia are the primary producers of PKO.  

Koh also highlighted that several policy initiatives are positively impacting consumption of CNO. These include Indonesia’s Coconut Downstream Roadmap 2025-2045, improved management of coconut and cocoa plantations through integration with the Palm Oil Plantation Fund Management Agency, and the Philippines’ shift to a B4 coconut-oil based biodiesel blend mandate.

For 2025, Koh projected that CNO production will range between 2.08 million and 2.13 million tonnes, while PKO production is expected to be between 6.7 million and 6.9 million tonnes.

For the first half of 2025, she forecast that CNO CIF Rotterdam will trade at US$1,950 to US$2,050 per tonne, while crude PKO is expected to be priced US$150 to US$250 lower for front-month contracts.

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