June 5, 2020 / 7:17 AM / a month ago

Malaysia palm oil refiners warn of high costs of meeting EU food safety limits

KUALA LUMPUR, June 5 (Reuters) - Malaysia’s palm oil refiners have warned the government that new food safety regulations required by the European Union should not be imposed across the whole industry, particularly in light of the coronavirus pandemic.

Malaysia, the world’s second-largest palm producer and exporter, said last year it would require refiners to ensure their products meet EU-prescribed levels for food contaminants glycidyl esters (GE) and so-called 3-MCPD esters by 2021.

The EU has imposed a limit for GE and will soon set a limit for 3-MCPD esters, both of which are formed in processed vegetable oils during the refining process and have raised potential health concerns.

The Palm Oil Refiners Association of Malaysia (PORAM) said industry-wide conditions did not make sense as Europe, which accounts for about 11% of Malaysia’s palm oil exports, was the only consumer implementing a limit on contaminants.

“With higher costs and minimal offtake, this will have an adverse impact on the entire export of refined palm oil products out of Malaysia,” PORAM chairman Jamil Haron said in a letter to industry regulator Malaysian Palm Oil Board (MPOB) on Thursday, a copy of which was reviewed by Reuters.

The regulations created “a serious risk to the financial sustainability of the refining industry, more so in light of the current COVID-19 pandemic,” he added.

The palm oil industry is already facing low prices and poor margins in an economy battered by coronavirus restrictions.

Crude palm oil prices have plunged 25% from January as lockdown measures to contain the outbreak shuttered restaurants and curbed travel around the world, cutting global demand.

Jamil said the new requirements would cost refiners millions of ringgit to refabricate and install necessary equipment, foot higher operational refining costs, and would drive up production costs.

MPOB did not respond to a request for comment by Reuters.

Reporting by Mei Mei Chu; editing by Richard Pullin

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