Indian restriction on palm oil imports will lower prices

The expected move by India is in reaction to statements made by Malaysian Prime Minister Tun Dr Mahathir Mohamad at the United Nations General Assembly last month that India had “invaded and occupied” Jammu and Kashmir.

PETALING JAYA: A potential restriction by India on palm oil imports from Malaysia will lead to higher stockpiles and lower crude palm oil prices here, CGS CIMB Research says.

The research house said the move would result in Indian downstream producers purchasing more palm oil from Indonesia, at the expense of Malaysian producers, over the short term.

“We are most concerned about the news that India may restrict palm oil imports from Malaysia.

“This may lead to weaker demand for Malaysian palm oil, leading to higher stocks and lower CPO prices for Malaysia due to limited market access to India, ” it said in a note.

The expected move by India is in reaction to statements made by Malaysian Prime Minister Tun Dr Mahathir Mohamad at the United Nations General Assembly last month that India had “invaded and occupied” Jammu and Kashmir.

Dr Mahathir also said in his speech that India and Pakistan should work together to resolve the conflict.

His statements led to an uproar online, with Indian social media users accusing Dr Mahathir of publicly siding with Pakistan against India in the ongoing dispute over the region.

They called for a boycott of Malaysian tourism, products and services, including airlines.

Last week, Dr Mahathir said the government had not received any feedback from the Indian government on the calls for a boycott.

Reuters, however, reported on Friday that India was considering the restriction on imports from Malaysia.

Citing government and industry sources, the report stated that the Indian government was “looking for ways to limit palm oil imports and may place restrictions on other goods from the country”.

These tensions also led to Primary Industries Minister Teresa Kok’s statement on Tuesday that Malaysia “is exploring the possibility” of sourcing raw sugar from India starting next year, as a way to enhance bilateral trade with the country.

India is the world’s largest importer of palm oil, with the country importing 8.8 million tonnes of palm oil in 2018.

Of this, 5.98 million tonnes were imported from Indonesia and 2.1 million tonnes from Malaysia.

CGS CIMB, in its report yesterday, said some Indian refiners had stopped Malaysian palm oil shipments scheduled for November and December due to fears of potential measures to restrict the imports.

“This is negative and could weaken Malaysian palm oil exports and raise stocks, ” the research house said.

It also noted that the French National Assembly had passed a bill earlier this year, stating that palm oil will not be eligible for tax breaks from January 1,2020.

The impact of this move, however, was expected to be minimal, the research house said.