Turning Strategy Into Outcomes ANNUAL INTEGRATED REPORT 2022 31 Operating Landscape 2023 OUTLOOK The retreating pandemic has boosted the outlook for the Logistics & Others Sector as demand for fuel, services and travel has improved. In terms of bulking and storage, palm oil production growth, coupled with improved demand, has catalysed exports, therefore improving the utilisation of oil storage facilities. The Logistics business also expects better growth prospects as a result of the economic recovery, supported by cross-border trade, higher domestic demand and a rise in e-commerce and last-mile delivery. The Travel business continues to see a steady recovery as tourism and travel pick up once again following the transition to endemicity. Many countries have reopened their borders, leading to a gradual increase in demand for travel. From the information & technology perspective, the adoption of digital technologies in many sectors is expected to drive growth in areas such as cloud computing, artificial intelligence, cyber security and the Internet of Things. These technologies have the potential to transform many industries and create new opportunities for businesses. Countries around the world are ramping up their food security measures amid supply chain disruptions, higher input costs of agricultural products and an increasing world population which crossed the eight billion mark in 2022. In Southeast Asia, the food industry is expected to chart an annual growth rate of 18.3% from 2023 to 2027, with revenue projected to reach USD12.18 billion in 2023 and market volume projected to expand to 23.83 billion by 20275. In Malaysia, the food industry generated revenue of close to USD50 billion in 2022, where main segments like cooking ingredients, fresh produce and dairy continue to demonstrate robust growth potential. LOGISTICS & OTHERS CONSUMER PRODUCTS & INTEGRATED FARMING The palm oil sector is set to see less volatility in 2023 relative to 2022. The MPOB, as well as domestic research houses, see the price of palm oil staying rangebound at an average of RM3,800 per MT in 20231. Although this is lower than the RM5,100 per MT average price in 2022, a number of factors could increase demand, such as the ongoing Russia-Ukraine conflict which has reduced sunflower oil production. Higher demand would also be supported by Indonesia’s announcement to increase its biofuel blending ratio from January 2023 and continued demand from India. However, challenges remain in the form of unfavourable weather caused by the prolonged La Nina phenomenon that may affect Fresh Fruit Bunch (FFB) production. The higher cost of fertiliser will also weigh on the industry, although labour shortages will likely stabilise, resulting in higher production in 2023 compared to 2022. This is likely to lead palm oil stocks ending 2023 at close to 2 million MT, higher than the 19.01 million MT recorded at the end of 20222. The plantation industry, in general, would stand to benefit from the advantages of embracing the Industry 4.0 which would enhance overall operational efficiency through precision agriculture, estate modernisation and digital milling practices. The price of raw sugar is expected to remain high in 2023, with the benchmark NY11 expected to reach USD22.90 cents per pound in 2023 compared to USD20.50 cents per pound in 20223. Additionally, the global sugar production is estimated to increase to 183.2 million MT in 2023 as higher production in Brazil, China, and Russia is expected to offset the decline in the European Union, India, and Ukraine4. In terms of refined sugar, demand remains high amid food security concerns and pent-up demand following the growing food and beverage industry, as well as the increase in global population. Other factors that will impact the industry include the ongoing Russia-Ukraine conflict and the diversion of cane to ethanol production instead of sugar production. Ethanol prices are closely correlated with crude oil prices and higher crude oil prices will certainly drive greater profitability of crop-based ethanol production. In the longer term, however, sugar remains a highly traded product with imports representing 35% of global consumption and no major changes are expected in the distribution of raw or refined sugar imports. PLANTATION SUGAR 1 Malaysian Palm Oil Board, January 2023 2 The Malaysian Oil Palm Industry Performance, March 2023 3 Trading Economics, March 2023 4 US Department of Agriculture, November 2022 5 Statista, February 2023
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