A ban on palm oil exports by Indonesia, the world biggest cooking oil exporter, may not be as stringent as previously believed, giving respite to rising prices and a possibility of global shortages.
According to Bloomberg, the export ban will only apply to bulk and packaged RBD palm olein — which accounts for 30%-40% of Indonesia’s total palm oil exports — while exports of crude palm oil and RBD palm oil won’t be halted.
RBD palm olein is a more processed form that is used in industrial frying of food.
India imported 5.64 million tons of edible oil during Nov-Mar’22 of which 47% is edible palm oil and its derivatives making it close to 2.65 million tons, ratings agency CRISIL said, adding that the share of Indonesian market in this is ~ 37% while Malaysia and Thailand contributed to the remaining 63%.
According to the Solvent Extractor Association of India, total palm oil imports from Indonesia stood near 0.98 million tons of which CPO and RBD Palmolein was 0.5 mmt and 0.48 mmt. As per industry stakeholders, Refined palm oil and RBD olein are blended and thus out of this 0.48 mmt of RBD imports, olien share would be close to 0.25 million tons. This could be substituted from Malaysia and Thailand market in the months ahead.
While this step of Indonesia to ban RBD olien could create short term price volatility, it would be favorable for the Indian edible oil refiners as the same will increase the share of CPO imports in country, CRISIL said.
Indian government gives more weightage to import of crude palm oil rather than refined oils to support local refining industry. Therefore, the duty differential is also kept at 8.25% between crude and refined oil. In January 2020, restrictions were also put by Indian government on import of refined palm oil with mandatory requirement for license or permission for inbound shipment.
“As a result, RBD olien imports declined by 85% in 2020 on y-o-y basis. The same was opened after one year during Jan’21 and RBD olien was added in list of free trade policy till Dec’22. Considering the landed cost calculations also, importing CPO seems economical as per current price and thus the imports of RBD was anyways expected to decline in coming time,” CRISIL said in a note.