Malaysia's Palm Oil Certification Split Set to Reshape EU Supply
- The European Commission's deforestation guidance names no certification scheme. UOB Kay Hian Research and the Malaysian Palm Oil Council say MSPO is the only one the EU recognises.
- Malaysia is classed "standard risk," facing annual compliance checks on 3% of shipments.
- UOB Kay Hian holds its crude palm oil forecast at RM4,500 a tonne for 2026 and RM4,400 for 2027.
The gap between certified and uncertified palm oil supply is about to become a pricing gap too.
MSPO, Malaysia's palm oil certification scheme, is the only one the European Union formally recognises, according to UOB Kay Hian Research and the Malaysian Palm Oil Council. The European Commission's own guidance on the deforestation regulation names no certification scheme at all, and treats certification as something that supports an operator's due diligence rather than replacing it. The gap between what the Malaysian industry says the rules recognise and what the Commission has actually written is the thing a UK buyer needs to watch, because it decides which suppliers gain ground and which lose it.
The EU Deforestation Regulation takes effect for large and medium operators on 30 December, and for smaller enterprises by mid 2027. Malaysia is classed as a standard risk country, not low risk. That means cargoes face annual checks on 3% of shipments, adding cost and scrutiny that low risk suppliers avoid. Malaysia's National Traceability System, combining e-MSPO, GeoSAWIT and SIMS, is the tool it is using to argue for a lower risk rating.
UOB Kay Hian named SD Guthrie, Kuala Lumpur Kepong and IOI Corp as the planters best able to absorb the compliance load. IOI Corp already reports full traceability, and all three carry buy ratings from the research house. Smaller, less traceable producers, particularly smallholders, are the ones expected to lose share as buyers tighten their specifications.
For a UK buyer of palm oil or its derivatives in food, personal care or cosmetics, that points toward fewer, larger, certified sources over time. Smallholder supply is the part expected to shrink first.
EU palm oil imports have already fallen to 2.85 million tonnes in 2025/26, down 5% on the year before. The research house puts most of that drop down to biofuel exclusion policy, not the deforestation rule itself.
UOB Kay Hian kept its crude palm oil forecast at RM4,500 a tonne for 2026 and RM4,400 for 2027. It expects verified, compliant cargoes to earn a premium as the market shrinks but tightens. It also flagged that if Japan, South Korea and China start asking for the same verification, non-compliant supply could be squeezed out well beyond Europe.
The businesses that come through this well are the ones that can already show which estate, and which certification, sits behind every tonne they buy. Those still buying on price alone, with no traceability trail back to an MSPO-certified estate, are the ones likely to see supply options narrow first.