The vegoil market exhibits a high degree of price elasticity, with immediate influence on purchasing decisions when the price of any one vegoil rises relative to others. For over eight consecutive months, palm oil has maintained a price premium over soybean oil because of tight supply, resulting in an increase in soybean oil imports by India, the top importer of vegoil. For the shipping sector, declining palm oil exports have reduced short-haul trade, while rising soybean oil imports have boosted long-haul trade routes.

Over the years, palm oil dominated the global vegoil market due to its high production and price competitiveness compared to other vegoils. However, the scenario changed dramatically in 2024 as palm oil commanded an unusual price premium over the rival soybean oil because of tight supply of the former. Contributing factors include tepid growth in production and a rise in biodiesel mandate in Indonesia, the largest producer of palm oil. The price premium of palm oil over soybean oil widened further in the first four months of 2025 since supply tightened further as palm oil production in Malaysia, the second largest producer of palm oil, declined sharply due to heavy rains and flooding.
Although a recovery in palm oil production in Malaysia amid weak demand has resulted in some cooling off in palm oil prices after April 2025, sluggish growth in production and rising biodiesel mandate in Indonesia will keep palm oil prices volatile in 2025 and beyond.

Figure 1: Palm oil price vs soybean oil

Source: Drewry Maritime Research, The Solvent Extractors’ Association of India

Tight supply of palm oil underpins long-haul trade of soybean oil
India’s imports of palm oil have decreased since the end of 2024, whereas the volume of soybean oil imports has remained stable and higher than that of palm oil imports. This came after the price of soybean oil decreased compared to palm oil. This changing trade pattern has reduced the short-haul trade (Indonesia to India) in favour of the relatively long-haul trade (Argentina to India), supporting the tonne-mile demand of chemical tankers.

Figure 2: India’s import trend*

* Total trade. Source: Drewry Maritime Research, TDM

Figure 3: Rising long-haul trade

Source: Drewry Maritime Research, TDM

The volume of palm oil available for exports will reduce in Indonesia, the largest exporter of palm oil, in 2025 as the feedstock use is set to rise with the B40 mandate. Moreover, the country plans to raise the mandate to B50 in 2026 and is also considering a 3% palm oil blend for jet fuel. Although the Indonesian government is promoting palm oil plantation, any significant surge in production will take time. This means the domestic consumption of palm oil will outpace the production in the country, reducing its exports. Meanwhile, Indonesia has increased the palm oil export levy from 7.5% to 10.0% from 17 May to fund the biodiesel push, further curbing its exports this year.

On the other hand, Malaysia is expected to continue the B10 biodiesel mandate, prioritising exports over domestic biodiesel production, which bodes well for the palm oil market.

Considering slow growth in palm oil production and rising biodiesel mandate in the largest palm oil producing country, global palm oil supply is expected to remain tight in the next couple of years and thus sporadic premium of palm oil prices over soybean oil prices over this period cannot be ruled out.
Figure 4: Palm oil used for biodiesel (million tonnes)

Source: Drewry Maritime Research, Oil World

Global dependence on soybean oil is rising
Global dependence on palm oil has declined significantly in recent years because of dwindling exportable surplus in Indonesia due to rising biodiesel mandate in the country. As the palm oil supply is expected to remain tight in 2025-26 due to rising biodiesel mandate and a slow growth in production, we expect the dependence on soybean oil to increase during this period. A likely higher production of soybeans in Argentina and Brazil in 2025 bodes well in this regard. Any surge in long-haul trade of soybean oil from the Americas to Asia at the expense of short-haul trade of palm oil from Southeast Asia to India will thus support tonne-mile demand for chemical tankers, especially IMO-coated MRs. However, any weather-related disruption to soybean production in Latin America could tighten the overall vegoil market, hurting the trade and tonnage demand in the chemical tanker market.
Figure 5: Global dependence on palm and soybean oil

Source: Drewry Maritime Research

Source: Drewry