Indian Edible Oil Market Rejoices as Indonesia Won’t Ban Crude Palm Oil Export

Indian edible oil markets rejoiced as Indonesia, the world's largest producer of palm oil, confirmed that the export embargo imposed late last week will only apply to shipments of refined, bleached, deodorized (RBD) palm olein. 

In some ways, this is also good to the Indian domestic refining business, since any action to limit refined oil imports boosts domestic oilseed crushing and refining.

"Nearly 70% of total annual palm oil imports into India, believed to be approximately 8-8.5 percent, is in crude form, with the remainder refined." "Reducing refined imports by Indonesia will help local refining even more," stated B V Mehta, Director General of the Solvent Extractors Association of India (SEA).

He described the action as a significant and welcome "U-turn" by the Indonesian administration. According to Sougata Niyogi, CEO – Oil Palm of Godrej Agrovet Limited, the move ensures that there would be no CPO supply difficulties in May.

"Higher refined palm oil imports have a negative impact on India's local refining capability, and any attempt by the nation of origin to reduce such imports is good," Niyogi told Business Standard.

India imports around 13-13.5 million tonnes of edible oils, with palm oil accounting for approximately 8-8.5 million tonnes (approximately 63%).

Following last week's declaration, trade insiders warned that if monthly shipments of about 300,000-325,000 tonnes of palm oil abruptly ceased in May, it would cause a substantial increase in edible oil prices in India, which were already on the rise due to the continuing Russia-Ukraine issue.

Meanwhile, Reuters reported that Malaysian benchmark crude palm futures slumped 2.09 percent after learning that the embargo only applies to RBD olein, after having risen over 7 percent to their highest level in six weeks.

In 2021, Indonesia sold an average of 620,000 tonnes of RBD per month, compared to about 100,000 tonnes of crude palm oil, according to Refinitiv Eikon. India, Pakistan, and Spain were among the most popular locations.

According to statistics from Indonesia's palm oil association (GAPKI), processed CPO exports in 2021 were 25.7 million tonnes, accounting for 75% of total palm product exports. CPO exports totaled 2.74 million tonnes in 2021, accounting for 7.98 percent of total shipments.

In January and February of this year, processed CPO exports were 3.38 million tonnes, accounting for 79 percent of overall exports, while CPO exports totaled 90,000 tonnes, accounting for 2 percent of total shipments.

Crude palm oil, which Indonesia uses for cooking oil, has reached historic highs this year due to increased demand and poor supply from key producers Indonesia and Malaysia, as well as a decision by Indonesia to limit palm oil exports in January, which was removed in March.