FGV Annual Report 2018

13 ESTABLISHED INTEGRATED AND COMPREHENSIVE IMPLEMENTATION PLANS 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 OUR MARKET LANDSCAPE 2019 INDUSTRY OUTLOOK PLANTATION – PALM OIL SUGAR LOGISTICS Source: EIU, Oil World, Rabobank, PwC The global production of palm oil is expected to rise by a slower rate of 2.30% in 2019 while consumption growth remains strong at 3.90%. This is attributed to worker shortage in Malaysia, acreage limitation, below-potential yields and a lack of replanting to improve the age profile. Indonesia will show a stable growth of 3.80% while Malaysia will register a slight drop in production. The outlook remains challenging for plantation players due to stock build-up and slower demand as a result of competition from soybean, as well as heavy stocks of other vegetable oil. However, this impact can be softened by higher biodiesel consumption in Indonesia and Malaysia and potentially higher demand from India due to a reduction in import duty. The possible return of the El Niño phenomenon will also weigh on future prospects for the palm oil market. Global sugar output is forecasted to decline by 3.70% to 180.50 million MT in 2019, but remain above the five-year average. This is driven almost entirely by a supply drop in Brazil due to competition from bioethanol production and drought in producing regions. Meanwhile, consumption will remain stable with 1.40% growth to 175.90 million MT in 2019, supported by population growth and rising demand from emerging markets. Malaysia’s logistics sector shows a positive outlook in 2019-2020, underpinned by stable trade growth and increasing freight transportation. Total freight volume is expected to reach 1.50 million MT by 2020 at a growth rate of 8.0% per annum (2015-2020). The fragmented sector has seen a series of acquisitions especially in Third-Party logistics (3PL), with niche market segments such as cold chain and oil & gas. Similarly, the booming e-commerce sector supported by the establishment of the Digital Free Trade Zone (DFTZ), will drive activities in the e-commerce logistics space. 40 20 60 70 10 50 30 80 2015 62.30 60.41 2016 58.56 62.47 2017 66.14 64.56 2018 70.35 67.42 Production Consumption Production Consumption 2019 71.94 70.07 (million MT) 100 150 50 200 2015 169.60 165.90 2016 164.30 169.20 2017 167.80 171.60 2018 187.50 173.50 2019 180.50 175.90 (million MT)