INDIA is seen as having little choice but to turn to Malaysia for its palm oil needs, especially if the Covid-19 pandemic situation in Indonesia gets worse and the country goes into full lockdown.
“The country (India) could step up purchases in the coming months as shipments are reportedly easing up,” the Malaysian Palm Oil Council (MPOC) said in its second quarter outlook for palm oil in South Asian countries.
However, the current lockdown conditions will be the determining factor as to whether the required import volumes can be achieved or continue to add to the current woes, it said.
In India, total imports of oils and fats are projected at 1.0 to 1.2 million metric tonnes (MT) on a monthly basis, in which palm oil’s share is at 50%, it said.
MPOC said the Saurashtra Oil Mills Association (SOMA), the largest organisation of groundnut oil millers, has also urged the Indian government to remove the restrictions on refined palm oil import to meet the huge shortfall in the domestic edible oil market owing to the lockdown.
“It added that the country could expect a spike in the domestic prices of edible oils in the coming month if there is no relaxation on palm oil imports,” it said.
Malaysia is currently going through a partial lockdown but the palm oil industry can continue to operate because of the importance of the commodity to the economy. The plantation sector has been allowed to resume operations alongside the refineries and cooking oil producers.
Nevertheless, the outlook report said Malaysia cannot expect to achieve the same market share in the palm oil import basket under the current situation as compared with a 45% market share last year.
A reasonable expectation for Malaysia’s share would be about 25%, which is closer to its share in 2018, it indicated.
Pakistan
As for Pakistan, it is anticipated that oils and fats imports will maintain their current momentum and exceed the total volume of 1.6 million MT by the end of June.
Pakistan is a net importer of oils and fats with 90% of the total requirement met by imports. This is the main reason that Pakistan’s imports are at their existing volumes, despite the ongoing pandemic and restrictions.
At the end of the first quarter of 2020, total imports of edible oil in Pakistan registered a decline of only 1.2% from the same period last year. During the same period, local stocks in Pakistan registered a decline of 9.5%, which compensated for the lower arrivals.
The arrivals of edible oil are also likely to strengthen in the months of May and June to capitalise on the 2% duty relief which the government of Pakistan has announced on the import of edible oil for a period of three months to June 30.
“It is also pertinent to note that palm oil and its major fractions contribute more than 95% of the total imports of oils and fats in Pakistan,” said MPOC.
Malaysian palm oil’s market share is currently at 27% and it is likely that Malaysia will continue to maintain this level and reach the total export volume of 450,000 MT by the end of June.
This is based on the assumption that the current disruption in Sabah plantations will not affect the overall supply situation from Malaysia.
Bangladesh
The MPOC said preliminary data from the local source shows that imports of palm oil on April 1-20, 2020 have declined to 88,271 MT from 130,746 MT during the same period a year ago.
Imports of crude degummed soybean oil however have increased to 92,300 MT during April 1-20 April, as opposed to 76,350 MT during the same period last year, owing to the competitive prices.
Imports of rapeseed/canola registered 19,748 MT in the first 20 days of April as compared with zero imports during the same time span last year, it said.
It is expected that palm oil consumption will continue to be affected as the impact of the Covid-19 pandemic could be prolonged until the end of 2020.
“Hence, we could see a further reduction in the import of palm oil in the second quarter of 2020. A higher quantum of decline can be expected since palm oil has a larger share in the Bangladeshi edible oils market,” the MPOC report said.
Based on MPOC Dhaka market intelligence data, consumption of palm oil during Ramadan 2020 is expected to decline by 62% to approximately 97,000 MT, a steep drop from 255,000 MT that was recorded during the month of Ramadan in 2019, said MPOC.
This includes reductions in household consumption, shortening/Vanaspati industries, food processing industries, hotels and restaurants including fast-food chains as well as street vendors.
Key export destinations
The South Asian countries are important export destinations for Malaysian palm oil. At the end of 2019, Malaysian palm oil exports to this region registered an unprecedented record of 5.75 million MT, an increase of 36.3% from what had been achieved in 2018.
The feat was largely attributed to the significant increase in Malaysian palm oil exports to India which were recorded at 4.41 million MT due to an import duty advantage, accounting for almost 77% of the total Malaysian palm oil exports to this region.
The scenario has since changed for the first quarter of 2020 (1Q 2020). Data by the Malaysian Palm Oil Board (MPOB) shows that for January-March 2020, Malaysian palm oil exports to this region declined by 957,994 MT or 66.9% from the same period a year ago.
The staggering drop in Malaysian palm oil exports to India has contributed to the overall decline in the total exports into this region. Following a trade spat between India and Malaysia in 2019, a restriction has been imposed on the importation of refined palm oil into India.
The restriction has caused a major blow to exports of palm oil from Malaysia to India.
But while Indonesian suppliers have been fulfilling the added demand from India since the beginning of 2020, Malaysian palm oil has been gaining share in markets like Pakistan and Bangladesh.
Palm oil imports from Malaysia have increased due to the fact that Malaysian suppliers are able to offer competitive prices to the local buyers. — May 5, 2020, Bernama
