• Reuters reported that Indian importers are seeking to cancel up to 100,000 tonnes of CPO cargoes as costs have risen since the country raised the import duties on palm products. A broker was quoted as saying that after the increase in duty, the cost of imports went up by US$107/tonne for CPO. However, the domestic selling price has only risen by around US$60/tonne. Another broker said that imports would be substantially lower in April as most people are trying to cancel or renegotiate shipments.

• We believe that this is negative for CPO. Currently, India has sufficient inventory of edible oils at the major ports. Hence, the country does not need to increase its imports. However when the inventory declines, we reckon that India would have to start buying palm oil again regardless of the import duties. Inventory of edible oils at the ports and pipelines stood at 2.195mil tonnes as at 1 February 2018 vs. 1.73mil tonnes as at 1 February 2017. Recall that recently, India raised the import duties from 30% to 44% for crude palm oil and from 40% to 54% for refined palm oil. The import duties on other vegetable oils such as soybean oil were not revised.

• In a related development, Bloomberg cited an industry player in India as saying that the increase in import duties may see India reducing palm oil purchases from an earlier estimate of 9.8mil tonnes to 9.5mil tonnes in 2017/2018F. Palm imports may decline by 50,000 tonnes per month between April and June 2018 to about 800,000 tonnes per month. The industry player added that palm oil has become costlier compared with soft oils such as soybean oil and canola.

• According to Bloomberg, Europe has given a warning to Indonesia on its threats to curb palm oil shipments to the region in response to the proposal to ban palm biodiesel. An official with the European Commission said that halting palm exports would be against the rules and this would result in a complete breakdown in negotiations. He added that palm oil would still be allowed to be imported into Europe as it is used in the cosmetics, chemical, pharmaceutical and food industries.

• It was also reported that the Indonesia Estate Crop Fund for Palm Oil is expected to collect Rp13trillion (US$943.9mil) in 2018F (2017: Rp14.2trillion (US$1.06bil)) from exports of crude palm oil and products. The agency plans to use 22% of the funds for replanting and 70% for the subsidisation of biodiesel. Collection is anticipated to be lower this year due to the foreign exchange rate and restrictions on certain palm products e.g. biodiesel to the USA and Europe.

• Reuters cited China's top feed maker as saying that animal feed makers in the country will find ways to cope if a trade dispute with the USA hurts imports of US soybean. An official with New Hope Group said that Chinese buyers would find alternative suppliers as the soybean market is huge. Industry experts have speculated that China would switch to soybeans from Brazil if there are trade restrictions on US soybeans.

• GNNLiberia quoted Equatorial Palm Oil PLC as saying that the construction of its palm oil mill at Palm Bay Estate, Liberia is progressing well. Commissioning is expected to take place in 3Q2018 and as such, the first shipment of palm oil is anticipated to be in 4Q2018. The palm oil mill's capacity is estimated to be 30 tonnes per hour. Equatorial Palm Oil is 62.9% owned by Kuala Lumpur Kepong.

Source: AmInvest Research - 12 Mar 2018