Palm Oil Moves Into Malaysia’s Defence Supply Chain

Malaysia is moving to commercialise locally developed palm oil-based technology for the production of explosives and ammunition, creating an unusual new pathway for the country’s palm oil industry while supporting efforts to strengthen domestic defence manufacturing.

Universiti Pertahanan Nasional Malaysia (UPNM) has signed a memorandum of agreement with Ketech Asia Sdn Bhd to take the technology from laboratory development towards large-scale production for the defence and security industries. The agreement was signed during the University Research, Innovation and Investment Summit (URIIS) 2026 organised by the Higher Education Ministry.

The collaboration is designed to move the technology from Technology Readiness Level 3, representing the laboratory stage, towards TRL 8 or 9, where a technology is considered ready for full-scale production and deployment.

For Malaysia’s oil palm sector, the significance lies in the potential expansion of palm-based products beyond traditional food, oleochemicals, biodiesel and consumer applications. UPNM said the technology demonstrates how biological resources available domestically can be incorporated into strategic industries and potentially contribute to a more resilient national supply chain.

Malaysia remains one of the world's largest palm oil producers, with the Malaysian Palm Oil Board reporting more than 20 million tonnes of crude palm oil production in 2025. The country also has around 5.7 million hectares planted with oil palm, giving researchers and manufacturers a substantial domestic biological resource base from which to develop higher-value applications.

The scale of the underlying raw material is significant. Malaysia produced about 1.82 million tonnes of crude palm oil in August 2026 alone, alongside more than 430,000 tonnes of palm kernel. Such volumes provide an extensive feedstock ecosystem for Malaysia's downstream palm oil and biomass industries.

The development comes as Malaysia seeks to move further downstream and extract greater value from its oil palm resources. Rather than relying exclusively on bulk commodity exports, research into advanced materials and other industrial applications could create additional markets for palm-derived feedstocks and strengthen the connection between plantation output, biotechnology, advanced manufacturing and strategic industries.

The potential market is substantial. Global industrial explosives market estimates put the sector at around US$8.7 billion in 2025, with the market projected to reach approximately US$12.4 billion by 2034. Asia Pacific represents one of the largest regional markets, driven by mining, infrastructure development and resource extraction.

The global ammunition market is considerably larger, although estimates vary according to how ammunition and related defence products are defined. One recent industry estimate valued the global ammunition market at about US$18 billion in 2025 and projected it to reach more than US$29 billion by 2035.

For Malaysia, however, the strategic significance extends beyond the potential size of the international market. The country continues to rely on imported inputs for parts of its ammunition manufacturing ecosystem, including materials and components required for conventional ammunition production.

Ketech Asia has been developing Malaysia's domestic ammunition manufacturing capabilities, including an automated facility in Kuala Lipis, Pahang, with reported production capacity of up to 130 million rounds of 9mm and 5.56mm ammunition annually.

The Malaysian Government has also moved to strengthen domestic ammunition supply, with the Defence Ministry awarding Ketech Asia a three-year RM150 million contract covering 9mm and 5.56mm small-arms ammunition for government agencies.

Against that backdrop, the UPNM-Ketech collaboration could form part of a broader effort to develop a more integrated Malaysian defence manufacturing ecosystem, potentially incorporating locally sourced biological materials into advanced industrial processes.

UPNM vice-chancellor Lt Gen Datuk Arman Rumaizi Ahmad said taking the technology from the laboratory to commercial application would require investment, specialised testing facilities and industry expertise. The partnership is intended to facilitate full-scale prototype fabrication, field testing and standards certification in a more structured and sustainable manner.

For the oil palm industry, the development illustrates a wider shift towards finding higher-value uses for Malaysia's enormous biological resource base. Palm oil and its derivatives are already used across food, personal care, oleochemicals, biodiesel and industrial products, while researchers are increasingly examining applications in advanced materials, chemicals and other specialised industries.

The technology remains at a development stage, and its eventual commercial scale, palm-derived feedstock requirements and economic contribution have yet to be established. Nevertheless, its direction is significant for Malaysia's downstream strategy.

Palm oil is increasingly being viewed not simply as a commodity for food and fuel, but as a potential platform for higher-value industrial innovation. If technologies such as the UPNM project successfully progress from laboratory research to commercial production, Malaysia's oil palm sector could find itself supplying an increasingly diverse range of industries far beyond the traditional palm oil market.