PALMOILMAGAZINE, JAKARTA — Global palm oil trade flows in 2026 are expected to become increasingly polarized. Amid shifting policies and changing dynamics in the global vegetable oil market, India is projected to emerge as the main pillar of demand, while China and the European Union are likely to move more cautiously.
Citing an analysis by market analyst Sathia Varqa published by Fastmarkets and quoted by Palmoilmagazine.com on Wednesday (31/12/2025), global trade patterns will continue to be shaped primarily by major importing countries. India and China remain key players, although their respective contributions to demand growth are expected to diverge.
China is forecast to restrain palm oil imports throughout 2026. Ample soybean oil inventories—driven by higher crushing activity—combined with palm olein prices that remain relatively higher than soybean oil, are likely to suppress demand from the world’s second-largest economy. As a result, China’s room for growth in palm oil imports is expected to remain limited.
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In contrast, India—the world’s largest palm oil buyer—is projected to act as the main absorber of global supply. Stock replenishment by major importers, coupled with steady demand from the food sector, positions India as a crucial buffer in maintaining market balance and supporting global palm oil prices in 2026.
In Europe, Rotterdam continues to serve as one of the region’s key trading hubs and a benchmark for pricing. However, market liquidity and trading volumes have reportedly declined steadily over recent years. European Union policies, particularly the European Union Deforestation Regulation (EUDR), which has been delayed again and is now scheduled to take effect in December 2026, remain a significant factor shaping market sentiment.
The regulation has already begun to influence pricing for lauric palm oil products, especially crude palm kernel oil (CPKO), which is trading at a premium of around USD 350–400 per ton for supplies that comply with EUDR standards. While aimed at promoting sustainability, the regulation could increase compliance costs and potentially redirect trade flows between EUDR-compliant and non-compliant products.
On pricing, the physical palm oil market remains closely linked to futures contracts on Bursa Malaysia Derivatives. For 2026, prices are expected to stay firm in the first half of the year, supported by demand from the food and biofuel sectors. In the second half, prices may level off as Indonesian supply recovers, although volatility risks remain due to potential production disruptions or policy shifts.
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Regionally, Indonesia’s outlook will hinge on production recovery, the implementation of the B45 biodiesel mandate, and the operational impact of government-led land enforcement measures. Meanwhile, Malaysia continues to face structural challenges, including reliance on foreign labor and slow replanting progress. Market participants are therefore advised to closely monitor early first-quarter 2026 harvest reports from the Malaysian Palm Oil Board as key indicators of future production trends. (P2)
