Could you introduce MOMG and the role of the organization in Malaysia?

MOMG was formed in 1984 to promote the interests of the oleochemical industry in the country. Presently, the Group has 10 members, which represent the entire industry. All based in West Malaysia, our members are Edenor Oleochemicals, Evyap, Fatty Chemical, FPG Oleochemicals, IFFCO, IOI Oleochemical, KLK OLEO, Natural Oleochemicals, Pacific Oleochemicals and Southern Acids. They produce basic oleochemicals, as well as fatty acids, fatty alcohols, methyl esters, and glycerin. Out of the 18 million t of palm oil produced in Malaysia annually, roughly 70% goes to food, 10% to fuel, and 20% to oleochemicals.

How has the oleochemical industry developed in Malaysia?

Malaysia has been a pioneering Asian country in oleochemicals. The likes of Henkel and Unilever set up shop in Malaysia in the 1980s and, by the 1990s, the technology became readily available to other companies.

To what extent are sustainability concerns around the production of palm oil reasonable?

Both the upstream and the downstream of the oleochemicals industry have been going through a journey of legitimization over the past two decades. In the early 2000s, there was a bit of denial about the validity of environmental concerns, the industry reacting defensively to accusations around deforestation, for instance. However, some actors gave palm oil a bad name. In the last 10-15 years, the truth was established in the middle: Palm oil earned its recognition as the number one exported oil and the highest-yielding oil crop. Phasing out palm oil is not simple. Removing 20 million ha of palm oil would require 100 million ha of soya or rapeseed in replacement. Also, palm oil has unique properties not seen in soybean or rapeseed oil, including the fact that it is somewhat harder, mimicking tallow, whereas other oils are more liquid. Palm oil has very favorable food applications that are well-recognized by big players like Unilever, Procter & Gamble, Nestle, and Ferrero. For example, in 2018, the Iceland supermarket decided to phase out palm oil from all its own-brand products but had to backtrack the decision after two years due to shortage of other oil crops for its products.

The answer is not to remove palm oil, but to ensure the palm oil is sustainable. In Malaysia, RSPO is the gold standard for the industry, and it is believed about 20% of the palm oil industry between Malaysia and Indonesia is RSPO certified. We are trying to encourage more players to adopt the standard, but it is more challenging with smallholders.

At MOMG, we appreciate that the conversation is becoming more nuanced. As a mature industry, we need to be more transparent and accountable. The Swiss-based NGO WWF is now supporting the palm oil industry, together with mainstream media like Vox, which have shed light on some of the misconceptions surrounding its production. Deforestation has declined every year in both Malaysia and Indonesia, according to recent studies.

What has the rise in CPO prices in 2022 meant for the oleochemicals industry in Malaysia?

2022 was a perfect storm for the industry, the crisis in Ukraine having a substantial impact on prices, but the CPO price has softened since. The high commodity prices together with firm demand translated to very good margins for the oleochemicals industry in Malaysia. The lengthening of supply chains from two weeks to two months sailing times left more products stuck in transit and at the ports. 2022 was one of the best years for most players, but we believe this year will be the total opposite, because most buyers have overstocked at high prices, and producers are shifting again from “just in case” to “just in time” logistics, as the supply chain is decongested. Freight rates have come down, and I personally think people are again consuming more services rather than goods, hence the weak demand.

Do you have a final message?

Malaysian oleochemicals are known for high quality, outstanding production facilities and excellent logistics. With one of the top 10 ports in the world at our doorstep, a supportive government, and a focus on providing traceable and sustainable materials, Malaysia is a reliable partner for the chemical industry globally.