Mumbai (Commoditiescontrol) – Indian palm futures witnessed mixed trade with upside bounce during end of previous week due to rise in Malaysian exports demand with upcoming Ramzan festival. By the end of Week, benchmark May’19 contract, finally settled at INR 548.9, marking gain of 7.9 points compared to previous week close of INR 548 per 10 kg. Open Interest on other hand also increased from 3687 lots to 4118 lots in a period of one week.
The Solvent Extractors’ Association of India has compiled the Import data of Vegetable Oils (edible & non-edible) for the month of March 2019. Import of vegetable oils during March 2019 sharply increased by 26% to 1,446,557 tons compared to 1,146,051 tons in March 2018, consisting 1,393,255 tons of edible oils and 53,302 tons of non-edible oils. The overall import of vegetable oils during November 2018 to March 2019 is reported at 6,309,406 tons compared to 5,931,829 tons during previous year i.e. up by 6%.
According to industry sources, oilseed crushing units and edible oil refineries have reduced their operating capacity steadily to below the sustainable level of 30 per cent to reduce their operating cost and make business viable.
During Nov’18.-Mar.’19, Import of refined oil (RBD Palmolein) increased to 960,573 tons from 770,581 tons in same period of last year, however, Imports of crude oil also marginally increased and reported at 5,044,494 tons from 5,007,554 tons during the same period of last year. During Nov.- Dec.’18, the share of RBD Palmolein was just 10 to 12%, whereas now increased to 22%.
Indian vegetable oil processing units are facing two major fundamental issues. First, the European Union has decided to suspend use of CPO in bio-fuel due to which major producing countries like Malaysia and Indonesia are now focusing on supply of refined oil. Eventually, the supply of both CPO and RBD has been diverted to alternate major consumers like India and China. Consequently, India is becoming a dumping ground for vegetable oils.
Secondly, under the bilateral treaty with Malaysia, the government of India reduced effective import duty on RBD and CPO to 49.50 per cent and 44 per cent effective January 1, 2019 from 59.40 per cent and 48.40 per cent earlier. Also, Import duty on CPO and RBD from Indonesia declined to 44 per cent and 55 per cent effective January 1, 2019 from 48.40 per cent and 59.40 per cent earlier. SEA had advised the government to lower import duty by 5 per cen however no action has been taken yet from the government side despite having several appeals from the SEA and SOPA till now.
The stock of edible oils as on 1st April, 2019 at various ports is estimated at 970,000 tons (CPO 410,000 tons, RBD Palmolein 250,000 tons, Degummed Soybean Oil 140,000 tons and Crude Sunflower Oil 170,000 tons to and about 14,00,000 tons in pipelines. Total stock at ports and in pipelines is reported at 2,370,000 tons, increased by 175,000 tons from 2,195,000 tons as on 1st March, 2019. India’s monthly requirement is about 19.0 lakh tons and operate at 30 days stock against which currently holding stock over 23.70 lakh tons equal to 37 days requirements.
At Malaysia, April 20 days exports were reported down by Amspeck by 1.8% to 892,477 tons compared to 908718 tons observed last month, during similar time period. On other hand, ITS reported 2.5% raise in exports during 1-20 April to 900,920 tons. SGS report is still awaited.
At global front, China is keen to buy more Malaysian palm oil and the purchase this year will increase, according to Chinese Ambassador to Malaysia Bai Tian. He reiterated that last month’s injection of US$890 million (about RM3.69 billion) into Malaysia’s economy by purchasing 1.6 million tons of palm oil was a starter. That latest deal was struck on March 4 and it increased the palm oil sale to China by 500,000 tons. The envoy said demand is very huge for Malaysian palm oil in China, which has a population of 1.4 billion, as it is of high quality and competitive in pricing. With rise in demand from China, Malaysian prices are likely to find support in coming period.
Looking forward, demand for palm oil shall continue to increase in summers as the oil doesn’t solidify at room temperatures thus making it fit for commercial use. Further, upcoming festive period like- ‘Ramazan’ shall also support the demand and the prices in near term.
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