ASEAN palm oil market gets nervous
ASEAN palm oil market gets nervous
Reuters, Jakarta
The Southeast Asia palm oil market is getting nervous following more arrivals of soyoil from Argentina, with India, the world largest edible oils buyer, already showing huge appetite for soyoil because of lower prices.
Some 200,000 tons of soyoil -- a direct competitor of palm oil -- from Argentina is expected to arrive in Indian ports every month from June through October, as soybean harvests in the world's third largest grower are set to reach full swing next month.
"Now most of the problems have stabilized in Argentina and renewed buying has started from India," a Malaysian trader said.
"With prices of palm oil at high premiums... June...to October, all these months, India will take at least 200,000 tons of soyoil," he added.
The trader said refined bleached deodorized (RBD) palm olein was at US$711 a ton cif India after tax while crude degummed soyoil was at $572 a ton. Even after a refining cost of $25 a ton, soyoil is still much cheaper than palm oil.
Argentina's financial chaos including default on the national debt and devaluation of the peso, combined with a slow soybean harvest, halted the country's soyoil exports for two months, helping boosting prices of palm oil.
Argentina has harvested almost a half its projected 29.5 million-ton crop but traders said farmers may continue to retain more merchandise in the absence of a clear economic plan.
India bought around 70,000 tons of soy oil from Argentina, Brazil and the United States in March for April arrivals, traders said.
"India has bought a little more than 150,000 tons of soyoil in May. We may still see some palm oil buying this month but sales will definitely go down next month," said another Malaysian trader.
India is expected to import 450,000 tons of palm oil in May from top growers Malaysia and Indonesia, traders said.
Palm oil traders are cautiously watching progress of soyoil harvests throughout South America as that, combined with an expected higher output from Indonesia, would drag down palm oil prices in the coming months.
"The problem is also from other markets such as Europe, China and Pakistan...they will also prefer soy oil," one Indonesian trader said.
Palm oil trees in Indonesia started producing more oil this month after four months of a low production cycle, traders said.
Indonesia exported around 600,000 tons of palm oil in April, up from the normal 500,000 tons a month. Of this, Indonesia shipped 450,000 tons to China.
The country is also set to take advantage of a possible move from Pakistan, one of Malaysia's main palm oil buyers, to increase import duties for RBD palm olein and RBD palm oil by $25 a ton each in June's budget, traders said.
"Pakistan is building its refining industry. It's quite possible it may increase the taxes on refined oil and reduce those on crude oil," the first Malaysian trader said.
"It would open a new door for Indonesia to export CPO," he said, adding that Pakistan imported mainly refined products in the past years.
Traders said Pakistan may purchase up to 170,000 tons of palm oil from Malaysia and Indonesia in May, up from a normal 80,0000 tons a month because of falling local stocks.