Indian refiners cancel palm oil contracts on duty hike, price rise

Patanjali Foods

23/09/2024 10:37

By Rajendra Jadhav
       MUMBAI, Sept 23 (Reuters) - Indian refiners cancelled
100,000 metric tons of palm oil purchases for delivery between
October and December, as New Delhi's move to raise import duties
due to a rally in overseas prices prompted them to book profits,
five trade officials told Reuters.
    Refiners in the world's largest importer of palm oil
cancelled this quantity over the past four days, including
50,000 tons on Monday, after Malaysian palm oil futures jumped
to their highest level in 2-1/2 months.
    The Indian cancellations could limit the rally in Malaysian
palm oil prices  FCPOc3 , although they could support soyoil
prices  BOc2  as some refiners shift to soyoil.
    India earlier this month raised the basic import tax on
crude and refined edible oils by 20 percentage points, which
effectively increases the total import duty crude palm oil to
27.5% from 5.5%.
    "The hefty duty hike and the jump in Malaysian prices caught
everyone off guard," said an Indian buyer who operates a
refinery on the east coast and cancelled palm oil shipments for
October delivery.
    "It created a situation where refiners can make more money
by cancelling old purchases instead of refining and selling.
Sellers are happy too, since they can now sell at higher prices
to new buyers."
    India, on average, imports 750,000 tons of palm oil every
month, and the cancellation of 100,000 tons represents about
13.3% of monthly imports.
    Crude palm oil (CPO) is currently being offered at about
$1,080 a ton, including cost, insurance and freight (CIF), in
India for October delivery, compared to around $980 to $1,000 a
month ago, giving profit margin of $80 to $100 to buyers.
    East Coast-based refiners are washing out on contracts by
cancelling them and making a very decent profit, said Aashish
Acharya, vice president at Patanjali Foods Ltd  PAFO.NS , a
leading importer of edible oils.
    India imports palm oil mainly from Indonesia, Malaysia and
Thailand.
    "Refiners aren't sure about the demand for the December
quarter with these higher prices. They're also worried about
whether the prices will hold. That's why they're cancelling
contracts," said Sandeep Bajoria, chief executive of Sunvin
Group, a vegetable oil brokerage and consultancy firm.
    Price-sensitive Asian buyers traditionally rely on palm oil
due to its low cost and quick shipping times. However, with the
recent rise in prices, palm oil is now trading at a premium over
soyoil.
    Buyers will prefer buying cheaper soyoil and sunflower oil
for winter months than expensive palm oil, said a Mumbai-based
dealer with a global trade house.
    India's palm oil imports usually moderate during winter
months as the tropical oil solidifies at lower temperatures.
    India buys imports soybean and sunflower oil mainly from
Argentina, Brazil, Russia and Ukraine.

 (Reporting by Rajendra Jadhav; editing by David Evans)
 ((rajendra.jadhav@thomsonreuters.com; +91-22-68414378 ; https://x.com/Rajendra1857))