Indian palm oil duty hike rattles global markets

Indian palm oil duty hike rattles global markets

BOMBAY (Reuters): International palm oil prices fell on
Wednesday following India's decision to raise import duties on
vegetable oils to curb surging imports but traders said most of
the damage had already been done.

India, which became the world's leading edible oils importer
after overtaking China in recent years, has repeatedly hiked
duties under pressure from farmers hit by falling global prices.

Indian traders said the government's ruling on Tuesday that
hydrogenated vegetable oil producers would have to use a minimum
of 25 percent of domestic oils could restrict imports but the
duty hike would not stop the rush of imported oils.

The Ministry of Consumer Affairs and Public Distribution on
Wednesday increased duties on refined vegetable oils other than
RBD palm oil, coconut oil and others.

Traders said the effective duty on RBD palm olein would work
out to 44 percent from the earlier duty of about 33 percent. Palm
olein, mostly from Malaysia, accounts for the majority of India's
edible oil imports. Soft oils including soy and sunflower are
imported from the United States, Argentina and Brazil.

India imported 1.87 million tons of edible oil in the first
five months of the 1999/2000 (November-October) oil year, up 31
percent from the previous year.

Traders said New Delhi's latest move would affect exports from
Malaysia, already struggling with rising output but added that it
would take time to analyze the extent of the slowdown.

"Its a bombshell," said one trader in Kuala Lumpur.

India was the biggest buyer of Malaysian palm oil in 1999,
taking 2.38 million tons or a quarter of Malaysia's total exports
compared with 1.36 million tons in 1998.

India's edible oil imports have jumped in recent years on the
back of a slump in local oilseeds production, fast-growing
domestic demand and weak international prices.

Malaysian palm oil future prices on Wednesday ended at the
lowest level in two weeks following India's move. Overnight
losses in Chicago soyoil futures also pulled down prices.

The Indonesian market mirrored the weak Malaysian prices.

Malaysia's benchmark third position August contract closed 17
ringgit down at 1,030 ringgit ($271.05) a ton while palm olein in
Indonesia fell to Rp 2,825 per kg from between Rp 2,850 and Rp
2,875.

"Due to rising production and low costs, Malaysia has no
choice but to cut prices since we are its main markets," said
trader Neal Sahni of Producin, representatives of Nidera
Rotterdam.

The palm oil sector slipped a further $2.50 to $5 in early
European trading on Wednesday on the back of the Indian news.

Indonesian industry sources also estimated a fall in its
exports of crude palm oil and by-products to India, which
accounts for 15 percent of its total export market.