Global reliance on palm oil has significantly declined in recent years due to a drop in Indonesia’s exportable surplus, driven by rising domestic biodiesel demand and sluggish production growth. As palm oil supply is expected to remain constrained in 2025-26, Drewry forecasts an increase in soybean oil dependence during this period. A likely rise in soybean production in Argentina and Brazil in 2025 would bode well in this regard.

 

Moreover, any increase in long-haul soybean oil shipments from South America to Asia—at the expense of short-haul palm oil trade from Southeast Asia to India—will boost tonne-mile demand for chemical tankers, particularly MR tankers with IMO certification.

 

However, there are concerns that any climate-related disruption to soybean production in South America could negatively impact the overall vegetable oil market, harming trade flows and tanker demand.

 

Elastic Market

 

The vegetable oil market is highly price-elastic, with purchasing decisions shifting quickly when one oil becomes more expensive than another. For over eight consecutive months, palm oil has been priced higher than soybean oil due to supply shortages, leading to an increase in soybean oil imports by India, the world’s largest vegetable oil importer.

 

In the maritime transport sector, declining palm oil exports have reduced short-haul trade, while increasing soybean oil imports have supported long-haul trade routes.

 

Declining Palm Oil Maritime Trade

 

For years, palm oil dominated the global vegetable oil market due to its high production levels and price competitiveness relative to other oils. However, the landscape shifted dramatically in 2024 when palm oil prices surpassed those of soybean oil due to limited supply.

 

Factors contributing to this price rise include sluggish production growth and rising biodiesel demand in Indonesia, the world’s largest palm oil producer. The price premium of palm oil over soybean oil widened further in the first quarter of 2025 due to tighter supply, as Malaysia—the second largest palm oil producer—suffered a sharp production decline caused by heavy rains and flooding. In addition, slow production growth and rising biodiesel demand in Indonesia will likely keep palm oil prices volatile throughout 2025 and beyond.

 

As a result, India’s palm oil imports have declined since late 2024, while soybean oil imports have remained steady and above palm oil import volumes. This shift in trade patterns has reduced short-haul trade (Indonesia to India) in favor of relatively long-haul trade (Argentina to India), driving demand for chemical tankers.

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