15.04.2021 (www.hellenicshippingnews.com) - Malaysia has replaced Indonesia as the largest palm oil exporter to India for the first time due to a widening tax difference between the world’s two biggest palm oil suppliers.
India – the world’s largest importer of vegetable oil – bought 1.68 million mt of crude palm oil from Malaysia and 1.29 million mt of CPO from Indonesia between November 2020 and March 2021, data released by the Solvent Extractors Association of India (SEAI) on April 14 showed.
A year ago, Indonesia supplied 2.06 million mt of CPO to India in the five-month period, while Malaysia supplied 414,815 mt.
“Malaysia has lower palm oil export taxes compared to Indonesia …so the big tax difference has allowed Malaysia to export more palm oil to India,” Anil Kumar Bagani, research head at vegetable oil brokerage Sunvin Group said.
“It should be noted that Malaysia had a zero export tax on CPO until December 2020, while Indonesia had export levies.”
Malaysia and Indonesia account for 85% of the world’s total production of palm oil.
In February, India imposed an 17.5% additional duty on CPO. This narrowed the gap between the effective tax rates of palm oil and soybean oil from 8.25% to 2.75%, respectively.
Soybean oil and palm oil are fungible and used interchangeably based on cost considerations and availability in India’s price-sensitive market.
March imports match expectations
In March, India imported 526,463 mt of CPO, up 33.5% from February and in line with analysts’ expectations.
“Not a major surprise given palm oil still holds a strong discount to soybean oil and sun oil and given the requirements for Ramadan demand,” Marcello Cultrera, institutional sales manager at Philip Futures, said.
For April, Bagani forecast Indian palm oil arrivals at around 600,000-630,000 mt, but said the assessment is subject to revision based on actual lineups and sailed vessels. CPO accounts for 50%-60% of India’s total vegetable oil imports.
A record crop of mustard oil will check imports of edible oils in the future, SEAI said in its report.
Price risks ahead
High palm oil prices and a lack of fresh buying from destination markets amid rising COVID-19 cases in India could put prices under downward pressure, analysts said. However, if prices of related vegetable oils, mainly soybean oil, recover substantially, palm oil prices could benefit.
“The beneficial weather over the past few months should lead to a strong harvest along an increased workforce at fields from the second half of 2021,” Cultrera said.
Palm oil plantations, especially in Malaysia, have been hit a by a worker shortage in the past year as pandemic-related lockdowns have prevented foreign workers — who account for about 70% of its estate workforce – from returning to the plantations.
The average CIF India price of CPO rose to $1,126/mt in March, according to SEAI, the 11th consecutive month of its price rally.