The growing pressures seen across commodities globally seems to have impacted manufacturing activity in the region, with China reporting a flat manufacturing growth in the month of May and Japan similarly reporting lower than expected retail sales numbers. Contrary to this headline, bright spots remain in certain sectors where demand continues to be healthy, especially as the impacts from COVID-19 continue to improve in larger importing countries like the U.S. and western Europe. This disparity across sectors/regions and volatility across commodities is adding to the continued uncertainty on recovery from COVID-19 in the region, where more countries in South and South East Asia are grappling with a new wave of infections and lockdowns.
Malaysia has also seen the Movement Control Order (MCO) reinstated in June as their cases spiral, creating limitations on the industry and supply chains at large, and further creating a backlog of orders across a very tight shipping space. Thankfully, the MCO has had zero impact on our supply of oleochemicals from our plant in Kuantan, Malaysia. There is also the question of how a reduced workforce in Malaysia plantations may impact the palm crop yields over the next few months. Users and buyers have frequently responded to this situation by building inventory and increasing order volumes over the past year, thus amplifying the supply-demand disparity.
PKO RSPO MB premium inflation remains a challenge given the current spread of CNO vs. PKO and elevated by the robust demand from the sustainability commitments within consumer packaged goods. P&G Chemicals continues to make mass balance options available across our product range to enable our customers to secure their demand.
Along with the safety of our employees, supply chain resilience remains a priority. We strive to run our operations while providing clear guidance to our customers on market dynamics to ensure we can support your needs in this very volatile marketplace.