New Delhi November 17 2021: India’s palm oil purchases rose 15% in the marketing year 2020-21 (November-October) even though total vegetable oil imports stayed put, national trade body, the Solvent Extractors’ Association of India (SEA) said in a release Nov. 16.
The new data showed that palm oil regained market share in India’s vegetable oil landscape after shrinking to 55% of total imports in 2019-20 — down from its usual 60%-65% — as a pandemic-led national lockdown clamped down on eating out activities as well hotel businesses across the country.
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In 2020-21 palm oil’s share of imports grew to 63% as soft oil imports fell to a five-year low of 4.81 million mt from 5.96 million mt in 2019-20, SEA data showed.
“Reopening of HoReCa [Hotels, Restaurants and Catering] sector coupled with a massive reduction in import duties and allowing RBD palm olein import has helped India’s palm oil imports to surge in MY 2020/21,” Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group told Platts.
Palm oil imports by the world’s largest buyer of vegetable oils rose to 8.32 million mt in MY 2020-21 from 7.22 million mt in 2019-20, while total vegetable oil imports stayed “more or less same” at 13.53 million mt — the lowest in the last six years, according to the SEA.
Palm oil is the preferred oil in India’s HoReCa sector as it is comparatively cheaper than other soft oils such as soybean and sunflower, has a longer shelf life, and is stable at high temperatures used in frying. Meanwhile groundnut, soybean and mustard oils are popular household cooking oils in the country.
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“It’s likely the HORECA domestic requirements have increased palm demand through the improving relative value and competitiveness vs soft oils and the hedging of forward months subscriptions vs the expectations of supply,” according to Marcello Cultrera, institutional sales manager and derivatives dealer at Kaula Lumpur-based Phillip Futures.
Import bill hits record high
While India’s import volumes stagnated, the cost of imports hit Rupee 1.17 trillion ($15.7 billion), a record high, SEA data showed Nov 16 as supply constraints and a rally in the larger commodity markets pushed international vegetable oil prices to record highs in 2021.
Prices of crude palm oil or CPO at Indian ports crossed the $1,000/mt mark in January, SEA data showed. Meanwhile in Malaysia, palm oil futures set a record high in May and then set a fresh record in October as production failed to ramp up during peak season due to a continued labor shortage at the second largest producer and exporter of palm oil.
S&P Global Platts assessed the cost of CPO CFR West Coast India at $1,382.5/mt on Nov 15, up 58% from a year back.
To cut domestic prices of edible oil, New Delhi has slashed import taxes on edible oils four times since June 2021 and eased restrictions on the import of refined palm oil products such as Refined Bleached and Deodorized palm olein popularly known as RBD palm olein.
On Oct. 10, India also introduced stock limits on edible oils to regulate the inventory that wholesalers and retailers can carry to further reign in high domestic prices and prevent hoarding.
However, the ruling currently excludes exporters and importers, and trade sources expect India’s palm oil imports to hold between 600,000 mt-800,000 mt in the coming months.
