PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 12 Nov 2019, 9:48 AM


Plantation - Potential Import Ban From India

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According to Reuters news report, the government is considering restricting imports of some products from Malaysia, including palm oil in reaction to the recent remarks made on the Indian government’s action in Kashmir during the United Nations meeting. If this materialises, our palm oil exports will be adversely affected as Indian market made up 28% of our total palm oil export volume. We hope this issue could be resolved before it deteriorates further and escalates into a “trade war” as palm oil is an important commodity to both countries. At this juncture, we remain upbeat on the plantation sector outlook in anticipation of falling global palm oil inventories as we see few key catalysts from the supply and demand factors that could contribute to a lower stock level in Malaysia and Indonesia. We expect to see a pick-up in CPO prices after the peak production season is over.

  • What triggered the potential ban? It is believed that India’s government was angered by Malaysia’s allegation that India had “invaded and occupied” Jammu and Kashmir and asked the Indian government to work with Pakistan to resolve the issue during the United Nations meeting last month. To send a strong signal of its displeasure, the Indian government is looking for ways to limit palm oil imports and may place restrictions on other goods from our country. It is planning to substitute Malaysian palm oil with supplies of edible oils from countries like Indonesia, Argentina and Ukraine.
  • Facts about Indian vegetable oil consumption pattern. Given the widening discount of palm oil to soybean oil prices (USD140/mt vs 5-year average of USD102/mt), it is no doubt that palm oil has been the most favourite vegetable oil for the Indian consumers. The import duty plays a vital role in determining the appetite for CPO or refined CPO, which will have a big impact on its local refineries. Palm oil accounts for nearly 62% of India’s total edible oil imports. Soybean oil is the second most consuming vegetable oil, making up 28%. India, the world largest palm oil consuming country, has been buying more than 9m mt annually, mainly from Indonesia and Malaysia.
  • India has been our biggest palm oil buyer since 2014. For the first 9 months, India made up 28% of our total palm oil exports. India has been our biggest palm oil buyer since 2014, replacing China. This year, Malaysian palm oil saw a significant rise in Indian market share, up from 28.7% to 57.8% thanks to the preferential import duty on Malaysian refined palm oil for the first nine months.

Source: PublicInvest Research - 14 Oct 2019

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