Market Insight
26 August 2025
Palm Derivatives
The oleochemical market in 2025 reflects a period of dynamic transformation, where prices and demand for Crude Palm Oil (CPO), Crude Palm Kernel Oil (CPKO), and Palm Fatty Acid Distillate (PFAD) are being reshaped by tighter supplies, growing global applications, and evolving trade flows. As industries from energy to personal care increasingly integrate palm-based raw materials, stakeholders are navigating both opportunities and risks in a fast-moving environment.
CPO has been the standout performer in 2025, with prices surging by around 35% year-to-date compared to 2024, averaging USD 960–1,000 per metric ton (MT). This sharp increase comes after a weaker 2024, when subdued exports and production constraints weighed on the market. The current momentum is fueled by reduced production tied to La Niña weather effects and strong domestic demand in Indonesia and Malaysia, the world’s top producers. In local terms, Malaysian CPO prices ranged between MYR 4,187–4,472 per MT in August 2025, in line with USD price levels. With supply expected to remain constrained, many analysts anticipate continued firmness in pricing.
By contrast, CPKO has experienced downward price pressure relative to CPO, despite its critical role in industries such as biodiesel and cosmetics. Production has been forecasted to fall by around 1.5% year-on-year, partly due to weaker extraction yields. Although demand remains steady, heightened competition from substitute oils has capped price growth. Valued at roughly USD 5 billion today, the CPKO market is projected to expand at a CAGR of about 5% through 2033, though supply volatility linked to climate and logistics continues to pose risks.
Meanwhile, PFAD has reinforced its position as a strategic by-product, particularly in renewable energy. Its importance to biodiesel manufacturing has tied its market value closely to global biofuel demand, especially in Asia and the EU, where sustainable energy policies are pushing consumption higher. Although pricing data for PFAD is less consistently reported, its linkage to regulatory incentives highlights its growing strategic role in the energy transition.
Demand for palm-based oleochemicals has broadened significantly across industries. Surfactants used in detergents and personal care products are experiencing strong growth, while the cosmetics sector continues to embrace palm-derived fatty acids for product innovation. In parallel, biofuel mandates in key markets have accelerated demand for both CPO and PFAD, reinforcing their strategic importance in the global energy landscape.
Asia remains the anchor of demand, led by India and China, which import millions of tons annually to meet industrial needs. Europe, while smaller in absolute volume, is increasingly influential due to its emphasis on sustainable certification, shaping trade flows toward certified palm products. On the supply side, Indonesia and Malaysia still account for over 80% of global exports, but rising domestic usage and shifting regulatory frameworks are gradually reshaping export patterns.
Despite these growth drivers, risks remain. CPO prices remain highly sensitive to weather conditions and biofuel policies, CPKO continues to face structural challenges from substitute oils and weaker yields, and PFAD’s value is directly tied to the long-term stability of renewable energy incentives. For market participants, the strategic path forward lies in diversifying supply chains, securing forward contracts, investing in sustainability certifications, and leveraging technology to improve yield efficiency. Regional trade partnerships will also play an increasingly important role in navigating supply constraints and capturing growth opportunities.
In conclusion, 2025 has emerged as a defining year for oleochemical raw materials. With CPO prices climbing sharply, CPKO navigating supply and substitution challenges, and PFAD gaining momentum through renewable energy, the market is marked by both volatility and opportunity. Companies that adopt agile sourcing strategies, prioritize sustainability, and stay ahead of policy developments will be best positioned to thrive in this evolving global landscape.
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