Palm Oil News: Indonesia to Allow Key Palm Oil Exports, Sparking Price Swings
Top shipper hit ‘panic button’ to stem local supply shortages
Prices tumble as much as 4.1% to reverse an earlier surge
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.
“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.
Benchmark futures initially rallied after Indonesia said Friday that a shipment halt on all cooking oil will start from April 28 and last until the government deems a domestic shortage resolved. The announcement came as a shock to the market as a sweeping ban will worsen global food inflation and aggravate volatility in crop markets still reeling from the war.
Fruits of the oil palm tree are crushed to produce crude palm oil. Processing crude palm oil produces refined, bleached and deodorized palm oil, which can be further processed into RBD palm olein. RBD palm olein is primarily used as cooking oils and in industrial frying of processed foods.
