• Indonesia’s reduced tariff rate to 19% (vs. Malaysia’s prevailing 25%) narrows competitive advantage in the US market.
• While Malaysia’s planters’ low direct exposure to the US market helps cushion the earnings impact, intensified price competition in major markets such as India and China remains a risk if Indonesia diverts its US-bound supply.
• Maintain NEUTRAL stance on the plantation sector, with average CPO price forecasts of RM4,100/MT for 2025E and RM4,000/MT for 2026E.

Indonesia’s revised tariff undermines Malaysia’s edge

Malaysia’s prior export advantage, stemming from the anticipated 32% US tariff on Indonesian palm oil, has been significantly reduced following a last-minute trade agreement that lowered Indonesia’s tariff to 19% (against Malaysia’s prevailing 25%, which remains under negotiation). Malaysia now faces a disadvantage, which could strain its longer-term export growth to the US and potentially reverse recent market share gains. According to Oil World, Malaysia’s share of US palm oil imports for 8-month period increased to 15% for Oct-May 2024/25 period (from 6% during the same period Oct-May 2023/24), while Indonesia’s share declined to 83% (from 90%). These gains, largely the result of temporary tariff arbitrage, may be difficult to sustain as Indonesia restores its cost competitiveness.

Limited exposure to the US helps contain earnings impact

Despite concerns over higher tariffs, the US represents a small 1-3% of Malaysia’s total palm oil exports. In 2024, Malaysia exported 191,231 tonnes of palm oil to the US, accounting for 48.1% of the total 397,961 tonnes shipped to the broader Americas (Table 2). Among companies under our coverage, IOI and SDG derive c.1% of their respective sales from the US, while KLK’s exposure is marginally higher at c.2%. These exports typically serve specialized and high-value applications with limited substitutes, which should help maintain relatively steady demand. By comparison, Indonesia exported c.8% of palm oil to the US in 2024, signaling a comparatively higher sensitivity to changes in US trade policy. Meanwhile, the US accounts for merely 2.4% of global palm oil consumption (or 1.9m MT), suggesting that tariff changes will have minimal impact on overall global trade flows. Nevertheless, intensified price competition between Malaysia and Indonesia could emerge in key markets, such as India and China, if Indonesia redirects volumes initially bound for the US.

Sector outlook intact; diversification and upstream efficiency in focus

We maintain our NEUTRAL stance on the plantation sector as the US market constitute small proportion of plantation companies. Sector earnings are projected to grow by 9.9% YoY in 2025, supported by modest production recovery and steady prices, before declining by 3.8% YoY in 2026E on expectations of softer palm product prices, cost inflation, and potentially slower output growth. Malaysia’s ongoing export diversification strategy has proven effective, with India remaining the largest importer, followed by China, the EU, Kenya, and Turkey. This geographical diversity helps insulate the sector against external risks, including the EU’s deforestation rules and evolving US trade policies. We reiterate our 2025/26E СРО price forecasts at RM4,100/MT and RM4,000/MT, respectively. Our preferred sector picks are SDG (BUY; TP: RM5.21) for its diversified landbank, strong upstream contribution, and strategic diversification into the non-food downstream segment; and SPLB (BUY; TP: RM2.88) underpinned by a relatively young age estate profile and decent dividend yield. Key risks to our view include: 1) production surprises; 2) demand volatility; 3) changes in export/import policies; 4) crude oil price swings; and 5) macroeconomic headwinds.

MPOB (local-delivery) monthly price

Table 1: Malaysia key export destination

Table 2: Malaysia’s import to Americas

Americas – Import of Malaysian Palm Oil by Major Countries (tonnes)

Source: MPOB, MPOC, Phillip Research

Table 3: Americas import of PO by countries

Americas – Palm Oil Imports by Major Countries (tonnes)

Source: Oil World, MPOB, MPOC, Phillip Research

Table 4: Plantation annual key statistic projections

Source: Bloomberg, Phillip Research forecasts

Table 5: Peer comparison table

Source: Bloomberg, Phillip Research forecasts *calendarized data