In february 2025, the United States experienced a significant surge in palm kernel oil (PKO) import prices, driven by global supply disruptions and evolving trade policies. One of the primary contributors to this anticipation of consistent rise in overseas inquiries from end-user sectors, limited inventories among the traders and the price increase due to the anticipated operational halt of Malaysia's FGV Holdings Berhad, a leading palm oil producer. The company witnesses suspended its plantation activities from February 10 to February 28, 2025, due to unforeseen circumstances, leading to a notable reduction in Malaysia’s palm oil and palm kernel oil output. This supply contraction is set to tighten global supply chains, exerting upward pressure on prices.

Adding to the supply constraints for palm kernel oil, Indonesia, the world’s largest palm oil producer, will have implemented an increased biodiesel mandate, elevating the blend requirement from 35% to 40% (B40) starting January 1, 2025. This policy shift is intended to enhance domestic palm oil consumption for energy purposes, subsequently reducing the amount available for export. While industry analysts anticipate a gradual rollout due to logistical and financial complexities, the measure is still projected to curtail global palm kernel oil supply, further escalating prices.

As the U.S. heavily relies on imports to meet its palm kernel oil demand, these international developments will likely lead to greater market volatility. With the expected supply shortages for palm kernel oil from key Southeast Asian producers, March 2025 is forecasted to witness further price hikes, impacting businesses and consumers alike. As a result, the recent import prices during the third week of February were assembled at USD 1942/MT.

Complicating the situation further, the U.S. government will have announced plans to impose significant tariffs on a wide range of imports, particularly from China. While palm kernel oil is primarily sourced from Malaysia and Indonesia, broader trade policy shifts may indirectly affect import costs and market dynamics. These tariffs could prompt importers to seek alternative suppliers or modify their procurement strategies, potentially increasing operational costs and subsequently transferring these costs to end consumers.

The impact of rising palm kernel oil prices will be felt across multiple industries. In the food sector, where palm kernel oil is valued for its stability and texture-enhancing properties, manufacturers may face heightened production costs. The cosmetics and personal care industries, which heavily rely on the oil for its emollient qualities in products such as soaps, lotions, and creams, will likely experience cost pressures as well. Additionally, the biofuel sector, which uses palm kernel oil as a biodiesel feedstock, may encounter higher input expenses, potentially influencing fuel prices. To mitigate these challenges, industry stakeholders are expected to explore various adaptation strategies. Some companies may investigate the increasing availability of raw materials or reformulate products to reduce reliance on palm kernel oil. Others may seek to optimize supply chain efficiency or negotiate long-term contracts to stabilize costs. However, the effectiveness of these strategies will depend on the duration and severity of the supply disruptions and policy-driven market shifts.