PETALING JAYA: Malaysia’s oil palm industry stands to both gain and lose from the European Union Deforestation Regulation (EUDR), which comes into force for large and medium operators on Dec 30 this year and for smaller enterprises by mid‑2027.
On the upside, Malaysia is uniquely positioned because its Malaysian Sustainable Palm Oil (MSPO) certification is the only national scheme formally recognised by the EU.
That means Malaysian plantation companies could capture a larger share of the shrinking EU palm oil market, especially in food and oleochemicals where verified traceability is now essential, UOB Kay Hian (UOBKH) Research.
On the downside, Malaysia remains classified as a “standard risk” country, subject to 3% annual compliance checks, which adds costs and scrutiny compared to “low risk” peers.
The research house noted the implications for the oil palm industry are significant.
EU imports of palm oil have already fallen to 2.85 million tonnes in 2025/26, down 5% year‑on‑year, largely due to biofuel exclusion policies rather than EUDR itself.
The remaining demand pool is smaller but more tightly monitored, meaning compliant Malaysian cargoes could command a premium. Larger integrated planters such as SD Guthrie Bhd
, Kuala Lumpur Kepong Bhd (KLK), and IOI Corp Bhd are well placed to absorb compliance requirements, while smaller, less traceable producers may struggle, UOBKH Research noted in a sector update report.
It added the National Traceability System, integrating e‑MSPO, GeoSAWIT and SIMS, is central to Malaysia’s push for eventual “low risk” status.
Beyond Europe, the same verification standards could be adopted by buyers in Japan, South Korea and China.
If that happens, compliant Malaysian cargoes would enjoy wider market premiums, while non‑compliant supply – especially from smallholders – could be squeezed out.
This would reshape trade flows, potentially consolidating market share among larger Malaysian planters with strong sustainability credentials.
UOBKH Research maintained an ‘overweight’ call on the plantation sector, underpinned by structural demand growth from regional biofuel mandates such as Indonesia’s B50 policy.
Its crude palm oil price forecasts are kept at RM4,500 per tonne for 2026 and RM4,400 for 2027.
The research house top sector picks are SD Guthrie (buy; target price or TP RM7.65), due to its strong RSPO coverage and sustainability track record, and KLK (buy; TP RM24.65), as the company offers production growth and earnings recovery.
IOI Corp also stands out with 100% traceability with UOBKH Research having a buy call on the stock with a TP of RM5.15 a share.
