Market evolution: Skim milk powder (CN 040210) — 2015–2025

Introduction

Skim milk powder (SMP), classified under customs code 040210, covers milk and cream in solid forms with a fat content of ≤1.5% by weight. This heading aggregates four subcategories distinguished by sweetness and packaging size (≤2.5 kg vs. >2.5 kg). SMP is one of the EU's most strategically important dairy export products, serving as a key outlet for surplus skim milk and a staple ingredient in food manufacturing worldwide. Over the 2015–2025 period, the EU's trade in SMP was shaped by three major dynamics: a deepening of the bloc's role as a dominant global exporter, a significant reorientation of geographic trade flows, and a dramatic global price cycle culminating in the commodity shock of 2022.

1. The EU consolidated its position as the world's leading net exporter of skim milk powder

Over the 2015–2025 period, the EU strengthened its role as a dominant global supplier of SMP, with production growing, export propensity rising sharply, and the net export surplus widening significantly.

1.1. Production expanded by nearly 30% in volume and over 130% in value

EU domestic production of skim milk powder increased from 1,058 thousand tonnes in 2015 to 1,366 thousand tonnes in 2025, a rise of 29.1%. In value terms, the expansion was far more pronounced: production value grew from €1.85 billion to €4.29 billion (+131.9%), reflecting the global increase in dairy commodity prices over the decade, especially the 2022 spike. Peak production reached 1,761 thousand tonnes (quantity) and €5.18 billion (value).

1.2. Export volumes grew more modestly than values, pointing to price-driven gains

EU exports to non-EU countries rose from 707 thousand tonnes (€1.51 billion) in 2015 to 796 thousand tonnes (€2.03 billion) in 2025—a gain of 12.7% in volume and 34.3% in value. The gap between volume and value growth reflects a structural increase in unit export prices, from €2,136/t to €2,546/t (+19.2%). Export volumes peaked at 945 thousand tonnes in 2019, while export values peaked at €2.64 billion in 2022. The post-2022 retreat in volumes—to 796 thousand tonnes by 2025—suggests some demand adjustment following the price shock.

1.3. The EU's trade openness intensified, with export propensity more than tripling

Three indicators confirm the EU's deepening integration into global SMP markets:

• Trade intensity (exports + imports as a share of production) rose from 17.5% to 45.3% (+158.4%).
• Export propensity (exports as a share of production) surged from 13.0% to 44.0% (+238.5%), the fastest-growing metric.
• Net import reliance shifted from −8.1% to −71.5%, indicating that the EU went from modest net exporter to a major net exporter whose exports vastly exceed imports.

The trade balance remained consistently positive throughout the period, widening from €1.44 billion in 2015 to €1.92 billion in 2025, with a peak of €2.52 billion in 2022.

1.4. The bulk unsweetened segment overwhelmingly dominates EU exports and imports

The product segment breakdown reveals that subheading 04021019 (unsweetened SMP in packings >2.5 kg) accounted for the overwhelming majority of both trade flows in 2025:

• Exports: 785,000 t out of 796,000 t total (98.6%)
• Imports: 45,400 t out of 45,500 t total (99.8%)

The sweetened variants (04021099 and 04021091) and the small-pack unsweetened variant (04021011) represent marginal shares of trade. This concentration confirms that the CN 040210 trade flows are effectively industrial-grade skim milk powder in bulk form—a commodity product with highly integrated global markets.

2. Geographic reorientation reshaped both export destinations and import sources

The decade saw a significant reorientation of the EU's SMP trade geography, with North African and Middle Eastern markets gaining prominence on the export side, while imports diversified away from a handful of traditional suppliers.

2.1. North Africa and MENA markets became the EU's dominant export outlets

Algeria, Egypt, and Saudi Arabia collectively grew from €389 million in 2015 to €605 million in 2025 (+55.5%), cementing North Africa and the Middle East as the EU's primary export region. Saudi Arabia was the standout performer: its import of EU SMP surged by 150.3%, from €54 million to €134 million, making it the single largest export destination by value in 2025.

2.2. Southeast Asian markets also gained substantially, while China experienced a notable decline

The Philippines (+75.6%) and Malaysia (+95.9%) emerged as increasingly important EU export markets, reflecting growing dairy demand in Southeast Asian food processing. Indonesia, already a large buyer, expanded by 27.1%.

China, by contrast, represents the most striking decline among major partners. EU SMP exports to China fell 35.6%, from €119 million in 2015 to €76 million in 2025. The trajectory was highly volatile: values surged to €337 million in 2022 amid global dairy tightening, then collapsed by 77% over the subsequent three years. This likely reflects China's strategy of diversifying supply sources (notably New Zealand and domestic production expansion) and inventory management following the 2022 price spike.

2.3. Ukraine emerged as a major import source, while traditional suppliers weakened

The EU's import profile was transformed. Ukraine's SMP exports to the EU grew from €0.6 million in 2015 to €34.3 million in 2025—an extraordinary increase of 5,488%. This growth accelerated sharply after 2022, when the EU granted Ukraine temporary trade liberalisation measures.

Israel and Iceland, which were meaningful suppliers in 2015, effectively exited the EU market. Meanwhile, the concentration of imports (HHI by value) fell from 8,225 to 4,784 (−41.8%), confirming that the EU's small import base diversified significantly over the period. However, Ukraine's rapid rise introduces a new source of concentration risk.

2.4. EU export specialisation is concentrated in a handful of Member States

Ireland stands out as the EU's most specialised SMP exporter, with a Revealed Symmetric Comparative Advantage (RSCA) of 0.785 and an RCA of 8.30. France, Sweden, Finland, and Portugal also display positive specialisation (RSCA > 0). Among the largest exporters by value, France (€345 million), Belgium (€414 million), Germany (€312 million), and Ireland (€229 million) led in 2025. Belgium (+68.3%) and Ireland (+170.2%) posted the strongest growth over the decade among major Member State exporters.

The EU's export concentration (HHI by value) remained very low and stable (529 → 567), indicating that the EU's export base is highly diversified across partners—a structural buffer against demand shocks from any single market.

3. A global price shock in 2022 reshaped market dynamics and eroded the EU's historical price premium

The 2015–2025 period was marked by a structural increase in SMP prices and, most notably, an acute price shock in 2022 that temporarily inflated trade values across nearly all partner relationships.

3.1. Export prices rose 19% while import prices nearly doubled

EU export unit values increased from €2,136/t to €2,546/t (+19.2%) over the decade. However, import unit values surged far more dramatically, from €1,243/t to €2,412/t (+94.1%). As a result, the EU's historical price premium—the gap between its export and import prices—narrowed substantially:

The near-disappearance of the price premium by 2025 is striking. It likely reflects a combination of factors: rising global dairy prices narrowing the gap between EU-sourced and non-EU-sourced SMP; the entry of higher-cost suppliers (Ukraine, US) into the EU import basket; and the EU increasingly exporting to markets where it competes on price rather than commanding a premium.

3.2. The 2022 commodity boom produced acute price shocks across multiple trade relationships

The year 2022 stands out as the most turbulent period in the decade. Three export price shocks were identified:

All three shocks occurred in 2022 and involved price surges of 45–48%. The China shock was the most commercially significant given that China alone represented 13.1% of EU export value. These shocks coincided with the broader global dairy price spike driven by tight supply (drought conditions in key producing regions, post-COVID demand recovery) and the disruption of global commodity flows following Russia's invasion of Ukraine.

EU export values peaked at €2.64 billion in 2022 before retreating to €2.03 billion in 2025. Export prices peaked at €3,395/t in 2022, 58.9% above the 2015 level, before moderating to €2,546/t. The 2022 peak was not sustained, suggesting a supply-demand correction rather than a permanent price reset.

3.3. Export destinations showed low volatility; import sources were far more erratic

Volatility analysis (coefficient of variation of export values) confirms the stability of the EU's major export relationships. Egypt (0.15), Algeria (0.20), and Thailand (0.21) displayed the lowest volatility, consistent with their status as steady, long-term buyers of EU SMP. Yemen (0.39) and China (0.48) were the most volatile among major partners, reflecting episodic demand.

On the import side, volatility was dramatically higher. Ukraine (CV: 1.18), the United States (1.28), Switzerland (1.65), and Israel (2.42) showed extreme variability—consistent with the fact that these are sporadic or newly emerging import sources rather than stable suppliers. Only the United Kingdom (CV: 0.38), the EU's most consistent import partner, displayed comparable stability to the major export destinations.

Conclusion

Over the 2015–2025 decade, the EU's trade in skim milk powder underwent a fundamental transformation. The bloc consolidated its position as the world's dominant net exporter, with export propensity more than tripling and the net trade surplus widening to €1.9 billion. Geographic flows were reoriented: North African and Southeast Asian markets absorbed the bulk of growth, while China's role diminished significantly. On the import side, Ukraine emerged as a major supplier following EU trade liberalisation measures, while the overall import base diversified. The 2022 global commodity shock—driven by supply tightness and geopolitical disruption—produced the most acute price volatility of the decade, temporarily inflating trade values by 45–48% in some relationships before a market correction in 2023–2025. The near-elimination of the EU's historical export price premium over import prices represents a structural shift that merits close monitoring, as it may signal changing competitive dynamics in global dairy markets.