PETALING JAYA: Crude palm oil prices are expected to remain high this year, benefitting producers here despite India slapping restrictions on imports of refined palm oil, says an analyst.
Sathia Varqa, who runs Singapore-based Palm Oil Analytics, said media reports claiming India had banned the import of refined palm oil was inaccurate as a ban would run afoul of the World Trade Organisation.
Speaking to FMT, he said India was restricting the import of refined palm oil, which means a special permit would be needed to do so.
Such permits would likely be given to state trading agencies or private companies, he added.
Recent reports said that India’s commerce and industry ministry issued a notification declaring that the import of refined palm oil had been amended from “Free” to “Restricted”.
But Primary Industries Minister Teresa Kok has since rejected claims that India was targetting Malaysia.
She said while there was such a memo by the Indian government, it did not explicitly mention Malaysian refined palm oil.
Reuters had earlier reported that India was seeking to target Malaysia after a series of criticism by Prime Minister Dr Mahathir Mohamad on New Delhi’s policies, including over its new citizenship law which sparked protest across the subcontinent.
Sathia said where crude palm oil (CPO) was concerned, there were no such restrictions.
“But this doesn’t mean that India will buy CPO from Malaysia. They might not even buy CPO from Indonesia given the narrow price difference to soft oils like soybean oil which is trading cheaper than palm oil on the futures market.”
He expects CPO exports to India to slow down significantly and this will push stocks higher very quickly.
Still, he said, for 2020, CPO futures would trade between RM3,000 to RM3,300 per metric tonne in view of the limited supply and strong demand for biodiesel.
B20 biodiesel, a blend of 20% palm methyl ester and 80% petroleum diesel, made its debut in Langkawi earlier this year and will be introduced nationwide in stages.
Neighbouring Indonesia introduced B30 in December, the highest mandatory mix in the world, fuelling demand for CPO.
With India’s import restrictions, Sathia said refiners were likely to be affected, but producers would still do well due to high CPO prices and CPO imports not being subject to any restrictions. -FMT