Oleochem Analytics – Malaysia’s palm oil exports to India have increased compared to the previous year, leaving Indonesia as the second largest palm oil exporter to the country.
The world’s largest importer of vegetable oil purchased 1.68 million mt of crude palm oil (CPO) from Malaysia and 1.29 million mt of CPO from Indonesia between November 2020 and March 2021, according to the data released by the Solvent Extractors Association of India (SEAI) on April 14.
A year ago, Indonesia supplied 2.06 million mt of CPO to India in the five-month period, while Malaysia supplied 414,815 mt.
Malaysia has lower palm export taxes than Indonesia.
Since December 2020, Indonesia has initiated a progressive export levy system based on crude palm oil’s market price to fund its internal biodiesel program. Currently, Indonesia charges an export duty of $116/mt along with $255/mt in export levy, which amounts to $371 on every metric ton of crude palm oil.
Malaysia currently charges an 8% export tax on CPO. However, until December 2020 Malaysia had a zero export tax.
Malaysia and Indonesia account for 85% of the world’s total production of palm oil.
In March, India imported 526,463 mt of CPO, up 33.5% from February, similar to analysts´ forecasts.
For April, analysts forecast Indian palm oil arrivals at around 600,000-630,000 mt. Palm oil still holds a discount to soybean oil and sun oil making it the most attractive oil as requirements for Ramadan demand increase. CPO accounts for 50%-60% of India’s total vegetable oil imports.
Previous high palm oil prices and a lack of demand from destination markets amid rising COVID-19 cases in India could put prices under downward pressure, analysts said. However, while prices are expected to soften, strength in prices from related vegetable oils, mainly soybean oil, could limit much downward price direction.
Soybean oil and palm oil are used interchangeably based on cost considerations and availability in India’s price-sensitive market.
Favorable weather over the past few months along an increased workforce at fields is expected to lead to a strong palm harvest and possibly a decrease of Malaysia’s palm oil prices looking ahead.
Palm oil plantations, especially in Malaysia, have been hit a by a worker shortage in the past year as pandemic-related lockdowns have prevented foreign workers — who account for about 70% of its estate workforce – from returning to the plantations.