Palm oil imports will increase as tax cuts lure refineries

Palm oil imports into India are set to increase by as much as 100,000 tons per month from December, after the government cut import taxes on the tropical oil, making it cheaper than competing edible oils, industry officials said Friday.

Higher imports from India, the world’s largest buyer of palm oil, will support Malaysian palm oil prices that hit their highest level in eight years this month, but could weigh on the US soybean oil future.

India lowered its import tax on crude palm oil (CPO) from 37.5% to 27.5% on Thursday as it seeks to curb rising food prices.

“The cut has made palm oil more competitive as refineries have to pay 7.5% less tax on imports of palm oil compared to soybean and sunflower oil,” said Sudhakar Desai, president of the Indian Vegetable Oil Producers’ Association (IVPA).

India maintained the excise duty structure on crude soybean oil and crude sunflower oil at 35%.

Palm oil imports are expected to increase by about 100,000 tons each month from December, while soybean oil imports could decline from January, said Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil broker.

“Soybean oil import contracts have already been signed for deliveries in December. Soybean oil imports would decline from January to make room for palm oil,” he said.

After the duty cut, CPO has become $ 225 per tonne cheaper than soybean oil, compared to $ 175 before the cut, Bajoria said.

The South Asian country mainly imports palm oil from Indonesia and Malaysia, and other oils such as soy and sunflower oil from Argentina, Brazil, Ukraine and Russia.

“Compared to lower CPO production, lower CPO inventory and weather conditions at the end of this year, this (duty reduction) could lead to better CPO prices,” said Joseph Tek Choon Yee, CEO of IJM Plantations in Malaysia.

Palm oil imports into India fell 23% to 7.2 million tonnes in the 2019/20 marketing year, which ended October 31, the lowest in nine years, as demand from hotels and restaurants was limited by the coronavirus crisis.

In 2020/21 imports could increase by 25% to 9 million tons, Desai said.

Source link