India's palm oil imports are expected to fall to a near five-year low in January, hit by negative refining margins as the palm oil premium tropical oil over rivals is prompting buyers to seek more competitively priced soybean oil, government and industry officials told Reuters.
Lower palm oil imports by the world's largest buyer of vegetable oils could weigh on benchmark Malaysian palm oil prices but support U.S. soybean oil futures.
“In the first half of January, authorities seized about 110,000 metric tons of palm oil, a very small amount compared to the usual monthly imports,” said a government official, who requested anonymity because he was not authorized to speak to the media.
Drastic reduction in imports in January
The short queue of vessels transporting palm oil at major ports such as Kandla, Haldia, and Krishnapatnam reflects the current market situation. Over the next 15 days, this movement suggests a decline in oil exports. Estimates already indicate that the value could be around 300 to 370 kL for the month.
India imported, on average, more than 750,000 tons of palm oil per month. This figure corresponds to the marketing year ending October 2024. The information was released by the trade body Solvent Extractors' Association of India. The body plans to publish January import data in mid-February.
India imported 782,983 tonnes of palm oil in January 2024.
“Everyone in the industry is reducing palm oil purchases due to negative refining margins,” the Indian buyer said.
Two vegetable oil brokers and a shipping company that compiles data on ships lined up to unload at ports estimated that imports could range from 340,000 tons to 370,000 tons.
In the second half of January, more palm oil is expected to be unloaded at west coast ports than in the first half. However, total monthly imports are unlikely to exceed 370,000 tons, said an official with a Mumbai-based shipping company.
That would be the lowest level since March 2020, when New Delhi's unofficial restrictions on imports from Malaysia reduced shipments.
Prices and competitiveness with soybean oil
Refineries are suffering losses of more than US$1,400 a tonne refining palm oil for January shipments, and the oil is available at even lower prices for February and March shipments, said Rajesh Patel, managing partner at GGN Research, an edible oil trader.
Dealers are now offering crude palm oil (CPO) in India at around US$1,155 per tonne, inclusive of cost, insurance, and freight (CIF), for January delivery. They are also offering February and March shipments at US$1,140 and US$1,100, respectively.
Sandeep Bajoria is CEO of Sunvin Group, a vegetable oil brokerage. He stated that sellers are offering soybean oil at a discount compared to palm oil. Traditionally, soybean oil commands a higher price than palm oil. "Buyers are shifting from palm oil to soybean oil," Bajoria added. "This trend is likely to continue unless palm oil corrects and becomes available at a discount."
India buys palm oil mainly from Indonesia, Malaysia and Thailand, while it imports soybean oil and sunflower oil from Argentina, Brazil, Russia and Ukraine.
Source: Rajendra Jadhav and Clarence Fernandez | Notícias Agrícolas
