India issues import licenses for Indonesian origin RBD palm olein

Singapore — The Indian government has issued import licenses for 1.1 million mt of Indonesian-origin refined, bleached and deodorized (RBD) palm olein following its earlier announcement on January 8 that refined palm oil and palm olein imports would be "restricted," industry sources said Thursday.

A number of market participants said the move was purely "procedural" and had been "expected sooner or later."

"The restriction only meant that refined palm olein could still be imported with a license, it was not a complete ban anyway. Hence, people have applied for the license, some of which have been apparently granted now," a Singapore-based trader said.

A buyer based in India said: "There has not been an official announcement though, and no one has confirmed the receipt of the license. We are currently in talks with other local importers, as well as with our customs handling agents to seek clarity on the issue."

According to Sandeep Bajoria, head of Mumbai-based consultancy Sunvin Global, "It is likely that the licenses have been issued, but the licenses have not been received by the importers just yet."

The news was not welcomed by some market participants.

"I am not sure about the direction going forward. In early January, I felt that the decision to restrict palm olein imports was perhaps the result of lobby pressure from the local refiners. Now that this has been overturned in a way, I am very sure protests will be heard again. It will be interesting to see what happens then and how the reaction of the government," said an India-based source.

A trader also highlighted that import licenses had only been granted for Indonesian origin RBD palm olein, following the diplomatic spat between Malaysia and India. Indian buyers had reportedly been told to avoid Malaysian origin palm oil, both crude and refined varieties alike, following Prime Minister Mahathir Mohamad's comments about India's involvement in Kashmir and the citizenship amendment act, which had been perceived as critical.

The move is seen to be bullish for palm oil prices.

"The demand outlook has been very poor. Other than the Indian government's stand on Malaysian palm oil imports as well as origin-agnostic refined palm olein imports, the coronavirus also devastated commodity markets worldwide," said a Singapore-based trader.

"Though recent export figures for Malaysia have come in slightly better than market expectations, I was worried that sustained periods of low demand from both India and China would see the futures fall below MR2,500/mt. However, it is likely that we will see prices improve a little bit now," the trader added, noting also that Indian demand would remain under threat from other vegetable oils like soya bean oil and sunflower oil due to the narrow spread between these competing oils.

The third month contract on the Bursa Malaysia Derivatives Exchange came close falling below MR2,500/mt in Thursday trading, hitting a low of MR 2,516/mt before bouncing back to close at MR2,585/mt.

According to the Solvent Extractors Association of India, palm oil imports for the first quarter of the 2019/20 Indian marketing year commencing November 2019 retreated 13.5% year on year to 2 million mt.

Conversely, soybean oil imports were up 24.9% with sunflower oil imports also up 26.8%. Indian imports of palm oil (including RBD palm olein, crude palm oil, crude olein and crude palm kernel oil) in January 2020 stood at 594,804 mt, down from 741,490 mt in December, with some market participants estimating that February 2020 imports may retreat further to around 500,000 mt.

Market participants remain unsure as to when RBD palm olein will be imported into the country again, not having sighted the import licenses and their corresponding details yet.

However, not much discernible effect was seen in Indonesian physical palm market. At 1000 GMT Thursday, CPO FOB Indonesia offers remained level day on day at around $665/mt. With regard to the Indian market, CPO West Coast India offers rose to $690/mt at the end of the day, compared to around $675-$680/mt earlier in the day.