Iran war boosts Malaysian data centre appeal, SD Guthrie says

[KUALA LUMPUR] Malaysia is expected to attract more interest as a data centre hub following the outbreak of the US-Iran war, according to SD Guthrie, giving the palm oil giant and the country’s biggest landowner an opportunity to capitalise on the boom.

Even before the Middle East conflict, Malaysia was already drawing data centre investment from companies including Alphabet’s Google, Amazon and Microsoft.

Over the weekend, Malaysian Prime Minister Anwar Ibrahim said Masayoshi Son of SoftBank Group chose locations in the country for US$50 billion in technology investments.

While the war was notcited as a factor in Son’s investment, SD Guthrie president and group chief executive officer Mohd Haris Mohd Arshad said Malaysia was the “most stable country” in South-east Asia for building data centres.

The world’s biggest palm oil planter by acreage previously flagged plans to use some of its lower-yielding land for industrial development to tap into the data centre boom.

The Middle East had been particularly attractive for data centre investment because of its abundant energy options, but the war has heightened risks in the region, Haris said during an interview on Friday (Oct 23), his first with foreign media since taking the helm in January.

“If you’re gonna build data centres for US$10 billion, you’re not gonna put it in a place where you might be bombed,” he said. “We are riding that wave of investment that is coming into” Malaysia, Haris added. 

A large share of data centre investment flowing into Malaysia has been earmarked for Johor, which is adjacent to land-constrained Singapore.

But as investment pledges roll in, Haris warned that energy constraints will need to be addressed for the region to realise its full potential.

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Data centres have signed agreements with Malaysia’s power utility Tenaga Nasional for as much as 8.77 gigawatts of peak demand, according to officials, equivalent to almost a third of 2025 installed capacity.

More power generation will be needed if the industry is to expand. In Johor, the centres could consume as much as 23 per cent of Peninsular Malaysia’s energy supply by 2031, according to BMI, a Fitch Solutions company.

SD Guthrie has over 210,000 hectares of freehold land, making the company Malaysia’s largest landowner, and has earmarked roughly 10 per cent of its current landbank for industrial development, along with renewable energy assets.

The palm oil producer expects income from industrial development to account for a third of its revenue by the end of the decade, Haris said.

Palm oil outlook uncertain

Even as it seeks to capitalise on the data centre boom, SD Guthrie’s core palm oil business faces a more uncertain supply outlook.

Haris said Malaysian production is expected to remain steady at around 20 million tonnes in 2027 despite a severe El Niño, although dry weather across Indonesia will likely disrupt crop development and delay fruit ripening. The company operates plantations in both countries.

“The concern is in Indonesia,” said Haris, adding that haze stemming from wildfires is slowing harvesting at estates in Kalimantan and Sumatra and could weigh on productivity.

“Indonesia may potentially struggle with crop size (in 2027) and this could then become a supply problem for the industry.”

Malaysia, the world’s second-biggest grower, is currently grappling with a supply glut but Haris sees stockpiles starting to decline by February or March, helping to support prices.

He expects benchmark palm oil futures to climb to around RM5,000 (US$1,224) a tonne by the end of the first quarter of 2027 on slowing output and firm demand. They are currently near RM4,800 a tonne.

SD Guthrie is keen to expand in Indonesia even as greater state control over the commodities sector creates some “uncertainty and angst” among producers, Haris said.

The company’s operations have not been disrupted by the policy shifts, he added, which include plans for centralised export controls.

“I would be willing to double down on Indonesia, with the right assets to acquire and with the right partners,” Haris said. “It may not be in upstream, but I’m quite interested to look at downstream.” BLOOMBERG