Indonesia Palm Oil Exports to India Seen at Record on Demand
Palm oil exports from Indonesia to India may climb to the highest ever as strong demand counters high import duties.
(Bloomberg) -- Palm oil exports from Indonesia to India, the world’s biggest buyer, will probably climb to the highest ever this year as strong demand counters higher import duties.
Shipments of palm and kernel oils to India climbed 32 percent to record 7.6 million metric tons in 2017 from a year earlier, according to the Indonesian Palm Oil Association, commonly known as Gapki. Exports are likely to advance further this year to keep pace with the South Asian country’s population and economic growth, the association’s secretary general Togar Sitanggang said, without providing any estimate.
India, which relies on imports to meet about 70 percent of its total vegetable oil requirements, doubled the levy on crude palm oil to 30 percent in November and increased the duty on refined palm oil to 40 percent from 25 percent. The move, coupled with high inventories in top producers Indonesia and Malaysia, resulted in palm oil prices dropping 19 percent last year.
“India’s import duty hike will likely be temporary,” Sitanggang said in text messages. “Now they feel they need to protect" their farmers and local output from imports. That stand may change and the duty may be cut again to meet the country’s edible oil demand, he said.
India may also consider a request from Indonesia’s President Joko Widodo to reduce the levy, said Derom Bangun, chairman of the Indonesian Palm Oil Board.
Palm oil futures for delivery in April fell 0.3 percent to 2,460 ringgit ($631) a ton on Bursa Malaysia Derivatives by 11:26 a.m. local time. The most-active contract has fallen 1.8 percent so far this year.
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Palm oil exports from Indonesia may rise at least 10 percent this year, Sitanggang said. The nation registered a 23 percent jump to 31.05 million metric tons last year from 2016, Gapki data showed. Total shipments to the European Union, the second-largest market, and China climbed about 15 percent, it said last week.
While India and the EU will remain as Indonesia’s top palm oil buyers, the Southeast Asian country must seek other markets to reduce the risk from trade hurdles, Bangun said in a telephone interview.
“There are plenty of opportunities” to expand the market, Bangun said. ”Gapki and the Trade Ministry have visited Chile, the Middle East and Turkey to discuss ways to increase exports and counter the threats.”
To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net, Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net.
To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Atul Prakash
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