Palm oil market awaits RI news
Palm oil market awaits RI news
KUALA LUMPUR (Reuters): Asian palm oil traders are largely unsure about this week's trend with markets still clouded by uncertainty over Indonesia's supply situation and prospects of slower export business.
They said the markets were likely to focus on currency movements.
"We feel that the trend is directionless in the immediate term. The Indonesian issue is still not resolved," said a trader in Malaysia. "Indonesia has to make a firm decision on the supply situation quickly. If not, we are afraid that smuggling will get worse as there is a short supply."
The Indonesian government, according to a media report last week, was considering banning export of crude palm oil (CPO) again due to tight supplies.
But State Minister for Food A.M. Saefuddin later told reporters Indonesia would continue to export CPO with an export tax.
He said Indonesia would import CPO if necessary to deal with domestic scarcity of cooking oil.
Some Indonesian traders said that at least 300,000-500,000 tons of crude palm oil had been smuggled from smaller ports in Sumatra from January to June this year.
Indonesian traders said prices of olein would not fall significantly this week due to an increase in possible smuggling.
"I think prices will only fall as low as 5,700 rupiah/kg," said one Jakarta based trader.
The government's decision to increase taxes on the export of crude palm oil (CPO) and its product from 40 percent to 60 percent does not ease the tight supply of domestic olein.
Indonesian traders expect exports to slow down following an increase in export tax for CPO.
"Exports will slow down a bit this week but possible smuggling is on the rise because it is more profitable for the exporters", said the Indonesian trader, citing an end to smuggling as a key to control the price.
"The impact from Indonesia's tax hikes is dying," one Singaporean trader said.
Some traders in Singapore said that a firmer Indonesian rupiah and no signs of Indonesia banning palm oil exports could slow down market activity.
"Room for a bull market is limited," said a trader in Singapore.
Malaysia's benchmark, third month October futures contract was closed on Friday at 2,414 ringgit a ton.
In Jakarta, Indonesian palm olein prices fell slightly yesterday as traders expected further falls this week due to increased domestic supplies.
"Prices could fall as low as 5,700 rupiah by the end of this week as so far we have been able to meet the local demand", said one Medan-based trader.
However, other traders said olein prices would only remain stable until the end of the week if Indonesian rupiah continued to fall. The rupiah was trading at 13,850/14,075 to the dollar at 0930 GMT compared with 13,275/13,375 late last week.
Ex-factory olein prices in Jakarta and Medan were quoted at 5,759 rupiah/kg and 5,350 rupiah/kg respectively.