In this list
Agriculture | Petrochemicals | Shipping

India turns to Indonesia for palm oil in August

Agriculture | Biofuels | Grains | Electricity | Energy | Coal | Coking Coal | Emissions | Thermal Coal | Electric Power | Energy Transition | Emissions | Renewables | LNG | Natural Gas | Oil | Crude Oil | Refined Products | Fuel Oil | Metals | Petrochemicals

China power crisis

Agriculture | Biofuels

Platts Biofuelscan

Natural Gas | Energy | Electric Power | Renewables | Oil | Coal | Emissions | Energy Transition

COP26

Energy | Coal | Emissions | Energy Transition

Top US officials share worries around climate progress, inflation but remain hopeful

Energy | Oil

Fuel for Thought: OPEC+ to set tone for 2022 with response to US oil release, COVID-19 variant

India turns to Indonesia for palm oil in August

Highlights

Indonesian palm oil now about $15/mt cheaper than Malaysia

Traders report incidents of vessel shortage, freight rate hikes

Indian demand shifts to CPO from olein in August

India's palm oil purchases picked up in August, with most of the new orders going to Indonesia rather than Malaysia, after Jakarta's export duty cut on crude palm oil (CPO) made it the cheaper option for Indian buyers, sources told S&P Global Platts.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Malaysia – the second largest producer and exporter of palm oil after Indonesia – has been India's preferred seller of palm oil in Marketing Year 2020-21 (November-October).

Between November 2020 - June 2021, India imported 2.61 million mt of CPO from Malaysia, followed by 2.21 million mt from Indonesia, data from Indian vegetable oil trade body, the Solvent Extractors' Association of India showed.

Indonesia traditionally has been the largest palm oil exporter to India, but higher export tax and levy had made it a costlier affair for Indian traders against buying Malaysian CPO for the past few months. However, a cut in export levy in June and export tax in July has reversed the market situation.

"At current prices Indonesia's CPO is at a discount of about $15/mt to the Malaysian side on FOB, including export duties and levies," Marcello Cultrera, institutional sales manager and broker at Kuala Lumpur-based Phillip Futures said.

Soaring freight looms over demand

India's order pipeline looks strong for now, but the demand uptick has been complicated by sky-high freight rates and unavailability of ships, according to some traders.

"Chartering a vessel has become a nightmare, freights are very high," an India-based trader told Platts. According to another source, the shortage of vessels has been a problem since July and has pushed freight costs up by around $6/mt.

According to Platts data, CPO CFR West Coast India prices rose 17% to $1,175/mt on Aug. 5 from $1,005/mt on June 30.

Olein loses shine

Another trend in India's August demand has been a shift back to CPO over Refined, Bleached and Deodorized palm olein or RBD palm olein, as traders feel that palm oil's sharp price rally in July to near record levels may negate olein's cost advantage by September.

Importing olein has an inbuilt cost advantage over CPO as it does not need to be refined unlike CPO which costs around $85/mt-$100/mt more to refine into edible cooking oil.

Although Indian vegetable oil refiners condemned the move to allow olein imports into the country, it was the preferred choice of palm oil import in July, according to market participants.

However, as the import tax on olein is 41.5% while CPO is taxed at 30.25%, and benchmark Malaysian palm oil futures rallied close to record-levels in July, effectively, olein's cost advantage has been voided for now and Indian importers may have to pay higher tax on olein in September, a trader said.

At end-July prices, total duty on CPO is about $130/mt lower than olein, according to an assessment by an Indian veg oil brokerage.

The demand uptick from India – the world's largest buyer of vegetable oils – may however be short-lived according to some industry watchers.

"India's orders picked up from end of July when prices were comparatively softer. but not sure if it will continue as the recent rally may dampen some purchases," David Ng, senior trader at IcebergX Sdn Bhd told Platts.