Low demand may hurt KL, RI palm oil

Low demand may hurt KL, RI palm oil

KUALA LUMPUR (Reuters): Palm oil freight rates from Malaysia
and Indonesia, the world's top producers, are likely to slide
further over the coming months in the absence of fresh demand
from major buyers, brokers said on Wednesday.

In the past few weeks, freight rates from Peninsular Malaysia
and Sumatra in Indonesia were flat at US$24-$25 a ton for the
west coast of India and at $19-$20 for the east coast, suggesting
the world's largest edible oil importer was turning its back on
palm oil.

Rates to India were hovering at $26-$27 a ton for the west
coast and at $21-$22 for the east coast in June/July.

"Dozens of vessels are still looking for palm oil cargo in
Pasir Gudang and other ports. It's been going on for a month,"
said one broker in Kuala Lumpur.

"Normally, we could see more than 10 ships leaving one
particular port in a week. It doesn't happen anymore," he added.

Peninsular Malaysia/Sumatra share similar freight rates.

Brokers said freight rates to various destinations such as
India, Pakistan, China and Europe were likely to fall by $1 a
ton in September and the following months because there were
almost no new contracts signed in August.

Traders and brokers said at least 600,000 tons of edible oil,
including 300,000 tons of palm oil from Malaysia and Indonesia,
arrived in India last month. But the palm oil cargo comes from
old contracts.

In Indonesia, the normally congested palm oil exports ports in
Sumatra were surprisingly quiet.

"I just got a call from someone who offered me some space. I
was so surprised because people always have to struggle to find
vessels to ship palm oil from Indonesia," said a trader in
Jakarta.

Traders said India had turned to other edible oil, such as
soyoil, since the government fixed base import prices of palm oil
in August to prevent underinvoicing.

India was Malaysia's main palm oil buyer in 2000, taking 2.03
million tons and also a major buyer of Indonesian palm oil.
India was seen buying 400,000 tons of palm oil in April, May and
June each, but the amount could fall to 200,000 tons in September
or even lower, they said.

In August, India fixed the base import price of crude palm
olein at $357 a ton. It means any importer will have to pay duty
assessed on an import price of $357 a ton for the oil no matter
what its purchase price.

India had earlier fixed the base import price of crude palm
oil at $337/ton and RBD palm olein at $372 a ton.

Some traders speculated buyers in India shunned palm oil
because of the recent rise in Malaysia's crude palm oil futures,
which hit a 22-month high at 1,315 ringgit ($346.05) (third-month
basis) in August.

Brokers said another big buyer, Pakistan, had bought plenty of
palm oil in July/August and is unlikely to return to the market
in September.

They said freight rates from Peninsular Malaysia/Sumatra were
flat at $23-$24 to Pakistan and at $46-$47 to Rotterdam. Freight
rates stood at $25 for north China, $24 for central and at $20
for the southern part of the country.