Polish Oils and Fats Updates Opportunities for Malaysian Palm Oil Trade in Poland

Outline of this Presentation

Introduction

Overview on Polish Oils and Fats

Palm Oil in Poland

Trends and Prospects for Polish Market

How Palm Oil Can Complement The Polish Market

Conclusions and Recommendations

Poland – Important Destination for MPO

• Poland has become one of the most

important palm oil importers in the

Central and Eastern Europe (CEE)

region.

• Palm oil export from Malaysia to

Poland in 2014 was at 35,200 MT (Oil

World). This makes Poland an

emerging market for MPO in the

region that includes Romania,

Bulgaria and new EU member state,

Croatia.

Palm Oil Exports from Malaysia to Major Oils and Fats Users in CEE Region

(Jan-Dec 2013-2014) - MT

Country 2014 2013 Change (Volume) Change (%)

Bulgaria 15,700 9,000 6,700 74.44

Croatia 4,700 4,500 200 4.44

Poland 35,200 35,900 (700) (1.95)

Romania 10,300 13,000 (2,700) (20.77)

Total 65,900 62,400 3,500 5.61 Source: Oil World

Overview on Polish Oils and Fats

Poland is the biggest producer of rapeseed oil among the countries in the CEE region. Crushings were at the highest

level in 5 years when a total of 2,460,300 MT of oilseeds were crushed in 2014. 2,400,000 MT or 97.5% of the crushings was

for rapeseed.

2014 2013 2012 2011 2010

Crushings

Soybeans 34.7 50.0 15.6 24.8 9.2

Rapeseed 2400.0 2290.0 2080.0 1990.0 2340.0

Sesameseed 5.0 5.0 5.0 5.5 5.8

Linseed 20.6 15.0 14.5 11.6 10.0

Total 2460.3 2360.0 2115.0 2031.8 2364.9

Crushings and Trade (with 3rd countries) of Oilseeds (1000 T)

Source: Oil World

Crushings and Trade (with 3rd countries) of Oilseeds (1000 T)

2014 2013 2012 2011 2010

Imports

Soybeans 24.6 45.0 10.6 19.6 3.6

Groundnuts 26.7 25.2 21.9 24.5 26.7

Sunflowerseed 12.9 13.3 13.2 11.7 8.4

Rapeseed 137.8 231.6 343.0 242.7 144.4

Sesameseed 8.9 9.2 8.6 9.0 8.8

Linseed 27.0 21.0 14.6 7.0 5.2

Total 238.0 345.3 411.8 314.4 197.1

Exports

Sunflowerseed 0.2 0.3 0.1 0.1 0.2

Rapeseed 0.1 57.8 0.1 0.1 0.1

Linseed 0.1 0.2 0.1 0.1 0

Total 0.4 58.2 0.3 0.2 0.3

Source: Oil World

Oilseeds Trade

• Domestic rapeseeds are traded within the EU member states. In 2014, Poland exported most of its rapeseed to Germany, Belgium-Lux and the Netherlands.

• Trade with third countries include rapeseed import from Ukraine and other parts of Europe namely Moldova and Russia. Poland also imports its rapeseed from other EU Member States such as Slovakia, Czech Republic, the Netherlands and Lithuania.

• Sunflowerseed is also another oilseed imported. Major trading sunflowerseed partners in the EU include Bulgaria and Hungary as well as from Moldova.

• Another oilseed imported is soybean and most of its soybean imports came from Ukraine, as recorded in 2014.

Oils and Fats Production

• Rapeseed oil is the main vegetable oil produced in the oils and fats sector. In 2014, 998,000 MT of rapeseed oil was produced, registering a growth of 36% from 733,200 MT recorded back in 2008.

• Larger planting and harvested areas as well as improved yields per hectare have contributed to the greater rapeseed outputs over the years.

• Poland has also maintained its production of lard with an average of 226,280 MT of lard produced annually since 5 years ago. Other oils and fats such as butter as fat as well as tallow and grease sum up the country’s total production.

Oils and Fats Exports

• Rapeseed oil is also a major export for Poland. In 2014, it accounted for 88% of total domestic exports of oils and fats, a growth of 40% from a year ago.

• Key destinations of Polish rapeseed oil are the EU countries, namely Czech Republic, Germany and Slovakia.

• Other exports include butter as fat, lard, tallow and grease as well as sunflower oil.

Rapeseed Oil Is The Major Oil Produced in Poland

0

200

400

600

800

1000

1200

1400

1600

2010 2011 2012 2013 2014

(10

00

T)

Rapeseed oil

Butter as fat

Lard

Tallow & Grease

Others

Source: Oil World

Biodiesel Is Gaining Importance

0

200

400

600

800

1000

1200

1400

1600

2007 2008 2009 2010 2011 2012 2013 2014

(10

00

T)

for Biodiesel for Other Uses

Source: Oil World

Palm Oil in Poland

Oils and Fats Imports

• To complement domestic requirements in the oils and fats sector, Poland imported a total of 660,700 MT of oils and fats in 2014, higher than 619,100 MT imported a year earlier.

• Palm oil is the main imported vegetable oil and second most consumed vegetable oil in the country after rapeseed oil.

• The demand for palm oil and its derivative products continues to increase from year to year leading to the boost in the import figures. In 2014, palm oil import into Poland was at 214,500 MT, accounting for 32% of total imports. This was an increase of 26.4% from 169,700 MT of palm oil that was imported in 2010.

Palm Oil Is The Most Imported Vegetable Oil

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014

(10

00

T)

Palm oil

Rapeseed oil

Soybean oil

Sunflower oil

Palm kernel oil

Others

Source: Oil World

Palm Oil Is The Third Most Consumed Oils and Fats After Rapeseed Oil and Lard

0

200

400

600

800

1000

1200

1400

1600

1800

2010 2011 2012 2013 2014

(10

00

T)

RSO

Lard

PO

Butter as fat

SBO

SFO

T&G

Others

Source: Oil World

Palm Oil Import

• The EU was the major trading partner for Poland as most of its palm oil was imported from the EU. Last year, palm oil import from the EU was at 175,600 MT, followed by Malaysia with 35,200 MT.

• Main palm oil products exported to Poland from Malaysia are RBD palm oil, RBD palm stearin and cooking oil. (MPOB)

• Other palm products exported to Poland from Malaysia include palm kernel oil (palm kernel fatty acid distillates), oleochemicals (soap noodles) and finished products (shortening and cocoa butter substitute). A significant amount of palm kernel shell was also exported to Poland in 2014 – 77,040 MT vs 24,621 MT (2013).

Palm Kernel Shell for Biomass Industry

• BMC bioPOWER is a Polish company extracting and importing biomass for energetic purposes.

• Palm Kernel Shells (or PKS) are the shell fractions left after the nut has been removed in the palm oil mill. Its high calorific values (on the average 4000 Kcal/kg) and low content of ash and sulphur recently have made it an attractive renewable energy fuel.

• Palm Kernel Shell can be burned as an independent eco fuel or, as a natural, high quality pellet, burn in cogeneration kettle as an addition to coal (in this form it significantly reduces the CO2 emission).

• PKS can also be used as an addition to other biomass fuels.

Trends and Prospects for Polish Market

Highlights in Oils and Fats Market

• Current value sales of oils and fats grow by 2% to reach PLN5.4 billion in 2014.

• Trend towards healthier and natural products influences oils and fats in Poland.

• Best performance of 6% current value growth was seen in butter in 2014.

• The average unit price of oils and fats increased in 2014, with butter seeing the strongest increase of 2%.

• ZT Kruszwica SA led sales with 21% value share in 2014.

• Oils and fats is expected to see a 1% volume CAGR over the forecast period.

Trends in Oils and Fats Market

• There is an increasing importance to a healthy lifestyle, looking for less processed food. More people are experimenting in the kitchen, prioritising genuine ingredients and traditional Polish cuisine, but prepared in a healthier way than ever before.

• Growing demand for natural products such as butter.

• Products with health and wellness-related properties such as functional or fortified spreadable oils and fats will see faster development than regular spreadable oils and fats.

• Consumers are seeking for ways to lower cholesterol through consumption of spreadable oils and fats with plant sterols and stanols, reducing cardiovascular risk.

Trends in Oils and Fats Market

• Rapeseed oil is set to be the most popular vegetable and seed oil, accounting for 83% value share in 2014. The reasonable prices and width of applications, such as frying, baking or addition to salads, cause local consumers to generally use rapeseed oil on a daily basis. It is the main oil plant cultivated in Poland and the high supply of raw materials promotes its use in production of vegetable and seed oils.

• Increasing awareness on hydrogenated and trans-fats from the daily diet. Published articles and information on the content of trans-fats not only in margarine, but also in spreadable oils and fats.

Prospects in Oils and Fats Market

• Oils and fats is expected to see a marginal constant value growth over the forecast period as the category already has reached a level of saturation with limited potential for further significant growth.

• Health awareness is likely to influence oils and fats in the coming years as products with health and wellness-related properties such as functional spreadable oils and fats, butter and olive oil are expected to have strong growth potential.

• Changing consumer habits as more are expected to prioritise the importance of healthy cooking.

Outlook for Sales of Oils and Fats by Category (Volume)

‘000 tonnes 2011 2012 2013 2014 2015 2016 2017 2018 2019

Butter 79.30 81.77 85.16 88.21 91.12 93.89 96.43 98.80 101.06

Cooking Fats 7.72 7.55 7.41 7.29 7.12 6.95 6.85 6.81 6.80

Margarine 46.92 46.61 44.38 42.60 41.13 39.92 39.04 38.44 38.07

Olive Oil 3.82 3.95 3.75 3.67 3.61 3.62 3.67 3.72 3.80

Spreadable Oils and Fats

153.72 155.97 156.26 156.71 158.04 159.50 161.05 162.70 164.48

Vegetable and Seed Oil

156.50 153.14 154.90 155.91 156.24 155.30 154.76 154.57 154.74

Oils and Fats 447.97 448.98 451.86 454.39 457.25 459.19 461.79 465.05 468.93

Source: Euromonitor

How Palm Oil Can Complement The Polish Market

Oil Palm Is A Non-GMO Crop

Oil palm is a non-genetically modified crop. Oil palm is bred through a natural process of breeding and is not genetically modified.

Palm Oil Is A Reliable Food Ingredient

Palm oil is one of the 17 edible oils recognized by the Food and Agricultural Organisation (FAO) and the World Health Organisation (WHO) (Codex Alimentarius Commission, 1983).

Palm Oil Is Free From Cholesterol

Like all other vegetable oils, palm oil is cholesterol-free (United States Department of Agriculture, 1979).

Palm Oil Is A Stable Oil

Palm oil has better oxidative stability and is resistant to the formation of oxidized polymers which form the sticky substance around the kitchen stove. Therefore, palm oil should always be the preferred choice for cooking oil.

Palm Oil Has Many Functional Properties

Palm oil functions as a good cooking oil due to its stability. Palm oil is also well balanced which makes it suitable to be made into margarines and shortenings for use in bakery products (MPOB, 2009).

Palm Oil Is Free From Trans-Fatty Acids

Having a unique and balanced composition of saturation and unsaturation, palm oil does not require hydrogenation for use as a fat component in foods, thus avoiding the formation of trans-fatty acids. Therefore, palm oil and palm stearin are good alternatives to replace trans-fat and formulate trans-free food products.

Conclusions and Recommendations

Strategic Recommendations

• In conclusion, health awareness is likely to influence the oils and fats demand in the coming years for Polish market. At the same time, local food manufacturers are competing with each other to offer attractively-priced products to the public as price remains the key purchasing decision factor.

• Palm oil yields are also consistently above those of its main competitors in the Central and Eastern Europe market and have continued to increase impressively. This translates into a competitive advantage in terms of its cost and price, which is persistently below that of the other vegetable oils.

• Although quality is becoming increasingly important in many parts of the CEE region including Poland, price volatility remains the main factor towards the demand for oils and fats in this region.

Strategic Recommendations

• Joint Venture and Cooperation in Trans-shipment Facilities - Malaysian companies must have palm oil stock locally available to capture the market. This can be done by having a joint venture and cooperation with local bulking facilities, which are appropriate for palm oil handling - storage and transhipment. Local production facilities allow manufacturers to maintain unit prices at a very competitive level.

• Engagement with Financial Institutions - Other collaboration could include a possibility in engaging financial institutions in Malaysia to support Polish oils and fats players who intend to buy more palm oil for local use.

• Poland as the Gateway to Eastern Europe - Port of Gdansk makes Poland strategically located in the centre of Europe. Being the largest seaport in Poland, it serves as a major international transportation hub situated in the central part of the Southern Baltic coast, which ranks among Europe’s fastest growing region. Port of Gdansk plays a significant role as a key link in the Trans-European Transport Corridor No. 6 connecting the Nordic countries with Southern and Eastern Europe.

Programmes Initiated by MPOC for Overseas Buyers

• PRIME Grant (Program for Rebuilding and Improving Malaysia’s Exports)

• Buyer Seller Mission

Group of overseas buyers coming to Malaysia, meetings with Malaysian counterparts or vice versa

• POTAP (Palm Oil Trade Awareness Program)

New and potential users of palm oil

To introduce various applications of palm oil

Avenue to develop business contacts

Programmes Initiated by MPOC for Overseas Buyers

• CARES (Customer Appreciation and Recognition Scheme)

Biz-match sessions and participation in local conferences

• All potential participants are invited to join the abovementioned programmes.

• Those who would like to apply for the above schemes, you may kindly contact MPOC HQ (Kuala Lumpur) or MPOC Regional Office in Brussels.

For feedback or suggestions, drop me an email at azriyah@mpoc.org.my Prepared by; Azriyah Azian Market Analyst, Europe Desk MPOC Kuala Lumpur