M'sian palm oil prices seen dropping further on India import duty - Mistry

Oil Palm Plantations

SINGAPORE: Malaysian palm oil futures will likely fall a further 2%-3% after India, the world’s biggest buyer, raised its import duties to the highest in a decade, top industry analyst Dorab Mistry said on Tuesday.

Malaysian palm oil futures slid for a third consecutive session on Tuesday to their weakest since mid-August at RM2,612 a tonne, hit by worries that India’s surprise move late last week to raise duties on edible oil imports would hit demand.

“We saw price reaction to India’s move on Monday, Malaysian palm oil futures are likely to fall further by around 2%-3% as the market adjusts to the duty increase,” Mistry told Reuters.

India lifted the import tax on crude palm oil to 30% from 15%, and increased import tax duty on refined palm oil imports to 40% from 25%.

Indian oilseed crushers had been struggling to compete with cheaper imports from Indonesia, Malaysia, Brazil and Argentina, reducing demand for local rapeseed and soybeans which have been trading below government-set prices in the physical market and angering farmers.

But the move is now likely to boost local oilseed processing activity, hitting imports, said Mistry, a director of Indian consumer goods company Godrej International.

He estimated Indian edible oil imports would decline from earlier estimates by 100,000 to 150,000 tonnes a month between December and February.

“There are around 2.2 to 2.3 million tonnes of rapeseed stocks and close to 10 million tonnes of soybeans,” said Mistry.

“These stocks will start getting processed at a strong pace.”

India’s edible oil imports are likely to drop to 15.5 million tonnes this year, down from an earlier estimate of 15.9 million tonnes, analysts said following the Indian tax hike. - Reuters