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Indian edible oil markets heaved a sigh of relief after Indonesia, which is the world’s largest producer of palm oil, clarified that the export ban announced late last week won’t be applicable to crude palm oil but will only cover shipments of refined, bleached, deodorised (RBD) palm olein.
This in a way is also beneficial to the Indian local refining industry as any move to curb import of refined oils boost domestic oilseeds crushing and refining.
“Almost 70 per cent of the total annual palm oil imported into India estimated to be around 8-8.5% is in the crude form while the rest is refined. Curbing refined imports by Indonesia will further aid domestic refining,” B V Mehta, Director General of Solvent Extractors Association of India (SEA) said.
He said the move marks a big and a welcome ‘U’ turn by the Indonesian government.
Sougata Niyogi, CEO – Oil Palm of Godrej Agrovet Limited said the decision will ensure that there won’t be any CPO supply issues in May.
“Higher refined palm oil imports hit India’s domestic refining capacity and any move to curb such imports by the country of origin is welcome,” Niyogi told Business Standard.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) is palm oil.
Of this, 8-8.5 million tonnes of palm oil, almost 45 per cent comes from Indonesia and the remaining from neighboring Malaysia.
After last week’s announcement, trade sources feared that if suddenly, monthly supplies of around 300,000-325,000 tonnes of palm oil stop from May onwards it will cause a sharp escalation in edible oil prices in India which have been already on the boil due to the ongoing Russia- Ukraine crisis.
Meanwhile, news agency Reuters reported that Malaysian benchmark crude palm futures fell 2.09% after news that the ban only covers RBD olein, having jumped nearly 7% to their highest in six weeks.
“The massive short covering fizzled out after hearing news that the ban only encompasses olein both bulk and packed from Indonesia,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
He said there were still concerns that crude palm oil would also be added to the list of banned products as it is raw material for RBD palm olein.
According to Refinitiv Eikon, Indonesia exported an average of roughly 620,000 tonnes per month of RBD in 2021, compared to an average of around 100,000 tonnes of crude palm oil. Top destinations included India and Pakistan and Spain.
The government’s move to control stubbornly high cooking oil prices caused a slump in shares of its biggest palm oil companies on Monday, while the rupiah-headed currency fell in Asia. Dollar-denominated bonds issued by Indonesia’s government fell more than 1 cent to their lowest since the Spring 2020 COVID market rout.
According to data from Indonesia’s palm oil association (GAPKI) , exports of processed CPO in 2021 stood at 25.7 million tonnes, or 75% of total exports of palm products. CPO exports were 2.74 million tonnes in 2021, or 7.98% of the shipments.
In January and February this year, processed CPO exports were 3.38 million tonnes or 79% of exports, while CPO exports were 90,000 tonnes, 2% of the total shipped.
Global prices of crude palm oil, which Indonesia uses for cooking oil, have surged to historic highs this year amid rising demand and weak output from top producers Indonesia and Malaysia, plus a move by Indonesia to restrict palm oil exports in January that was lifted in March.
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