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.