KL palm ends down, eyes on India

KL palm ends down, eyes on India

KUALA LUMPUR (Reuters): Malaysian palm oil futures closed lower on Tuesday after a keenly awaited crop report for October came within expectations and left players with few leads.

Traders said the market's immediate focus was on whether India would raise import duty on edible oils this week.

Such a move, which would follow a round of tax hikes in June by New Delhi, would further dampen Indian demand for palm oil, said traders.

India is the largest buyer of Malaysian palm oil.

Some dealers said additional duty by India had been factored into the Malaysian market and did not expect much impact on prices, which recently dipped to seven-year lows below 800 ringgit a ton.

But other local dealers said any fresh hike in taxes would further erode market share for Malaysian palm oil in India.

India took about 2.3 million tons, or a quarter of Malaysia's total exports of palm oil, in 1999. The bulk of purchases were in the form of palm olein.

Since June this year, India has been levying a 44 percent duty on imported palm olein and 27.5 percent tax on imported crude oils. It said last week it was considering further tax increases to protect its domestic oils industry.

"At the moment, all eyes are on India," said a Kuala Lumpur palm oil trader specializing in sales to India. "There is no other factor in the market now except for India raising oil duties again."

At the close Malaysian palm oil's benchmark third-month January futures contract was down seven ringgit to 848 a ton, off a high of 860 ringgit.

Volume was thin at 727 lots or 18,175 tons.

Crop forecaster Ivan Wong's latest estimates for palm oil output, exports and closing stocks in October, released after the market's midday break, proved largely academic to players.

Wong said he expected production to rise by nearly two percent to an estimated 1.13 million tons in October from 1.11 million tons in September.

He forecast end-October palm oil stocks at 1.37 million tons, down slightly from his previous estimate of 1.41 million on Oct. 23.

Exports in October were expected to be at a record high of 980,000 tonnes from 785,248 in September, Wong said. Dealers said the figures were within market expectations. Activity in physical palm oil was also thin.

November (south) crude palm oil was offered at 825 ringgit a ton against bids of 820, and traded at 830 to 820 ringgit.

Among refined products, November RBD palm oil was offered at $235 a ton FOB and December at $240.

There were offers for November RBD palm olein at $252.50 and December at $257.50.

November RBD palm stearin was offered at $192.50 and December at $195. November palm fatty acid distillate was offered at $135.