US recently announced they are banning Malaysia FGV palm oil due to evidence of alleged forced labour in their production process.

Last week, the United States (US) Customs and Border Protection (CBP) announced banning imports of palm oil from FGV Holdings Bhd citing an investigation following the allegation of forced labour.

The agency said the ban was from a year-long investigation conducted that produced evidence of abuse including physical and sexual violence, threats and intimidation, retention of identity documents, and abuse of the vulnerable.

The investigation also pointed out the possibilities of forced child labour in FGV’s production processes.

According to Brenda Smith, Executive Assistant Commissioner of CBP’s trade office, the use of forced labour allows companies to profit from the abuse of vulnerable workers.

“I can’t be more specific at this point but I would suggest that US importers doing business with palm oil producers take a look at their supply chain and ask a lot of questions around the labour practices,” – Executive Assistant Commissioner of CBP’s trade office, Brenda Smith.

Action from FGV Holdings Bhd

In a statement to theedgemarkets.com, FGV is working towards amending the issues related to the ban by US CBP and getting them to lift the ban against palm oil products by the group as soon as possible.

“We hope to meet with the CBP as soon as possible. At the moment, we are not in the position to indicate when such a meeting will take place as that depends on the CBP – FGV’s statement to The Edge Markets.

They added that not much information can be obtained about the type of evidence needed to lift the withhold release order (WRO) but they are working towards getting clarification from the CBP on this matter so the necessary evidence can be submitted.

Oil palm market price situation

CGS-CIMB Research in a note yesterday said that Malaysia’s palm oil stocks are expected to reduce 2% month-on-month (m-o-m) to 1.67 million tonnes at end-September 2020 as higher exports more than offset rising supply.

In a survey done by CGS-CIMB Futures, our nation’s palm oil output probably rise 2.6% m-o-m last month but the export volume rose to 9% m-o-m.

“Tighter inventories, concerns over labour issues in Malaysia and weather concerns may keep crude palm oil (CPO) prices supported in October,” – Ivy Ng, CGS-CIMB analyst

Meanwhile, on Bursa Malaysia yesterday (6th October), the FGV’s share price rose one sen or 0.97% at RM1.04 and giving the company market capitalisation of around RM3.76 billion. The counter saw 2.56 million shares traded.

Overall

Malaysia’s palm oil is now the center of attention following the ban from US CBP over the reports of forced labour. The FGV is currently working to lift the ban as soon as possible but it might take a while, especially with the on-going Covid-19 pandemic. 

 

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 How long do you think this ban will continue and what is the other effects to our palm oil industry?