Malaysia’s Kuala Lumpur Kepong Bhd (KLK) has benefited from increased sales of its certified sustainable palm oil (CSPO) but the overall sustainable palm kernel market is experiencing a period of volatility due to two large producers losing their Roundtable on Sustainable Palm Oil (RSPO) certification, GreenPalm said on 26 July.

Malaysia’s IOI Corporation Bhd was suspended by the RSPO on 1 April following allegations that it had failed to protect forests and peat areas, while Felda Global Ventures Holdings Berhad (FGV) voluntarily withdrew its 58 mills in Malaysia from RSPO certification on 3 May due to sustainability issues in its supply chain (see News, OFI July/August).

“Between them, the two producers supplied around 21% (639,000 tonnes) of the total available volume (3.07M tonnes) of RSPO-certified sustainable palm kernel,” GreenPalm said

“Felda plans to ‘progressively recertify’ its mills within three years and IOI says it is working with its stakeholders and the RSPO to voluntarily adopt the more stringent certification system starting from the end of this year.”

GreenPalm said that due to the complexity in the palm kernel supply chain, RSPO certified segregated palm kernel oil is still hard to source.

“Consequently, the drop in supply will have a severe impact on buyers seeking physical palm kernel oil, either Segregated or Mass Balance*.

“Indications are of a continuing squeeze on certified physical supplies, particularly palm kernel oil.”

GreenPalm said that KLK had benefited from the overall drop in certified palm supplies.

“Previously, about 30% of its product was sold with a CSPO premium but that figure has now risen to almost 50%.”

Buyers still had the option to support certified palm and palm kernel oil production via the GreenPalm trading platform, although certificate prices were increasing in response to the crisis.

"This is good news for sellers of GreenPalm certificates, who can command a higher premium as competition for certificates intensifies. But it's less promising for buyers committed to sourcing physical certified material, or for those who do not act quickly enough to beat the price increases," said GreenPalm general manager Bob Norman.

* Currently, there are four sources of sustainable palm oil (PO), palm kernel oil (PKO) and palm kernel expeller (PKE):

Identify Preserved (IP): Originates from one specific certified sustainable producer and kept separate throughout the supply chain.

Segregated (SG): PO, PKO and PKE from several certified sustainable sources that is kept segregated throughout the supply chain.

Mass balance (MB): PO, PKO and PKE that contains a proportion of non-certified material mixed with certified sustainable product.

GreenPalm/Book&Claim: Buyers of certificates are guaranteed that a tonnage of PO, PKO and PKE equivalent to the tonnage they use has been produced by certified sustainable sources.