MUMBAI, Sept 24 — Indian refiners cancelled 100,000 metric tons of palm oil purchases for delivery between October and December, as New Delhi's move to raise import duties amid a rally in overseas prices prompted them to book profits, five trade officials told Reuters.
Refiners in the world's largest importer of palm oil cancelled this quantity over the past four days, including 50,000 tonnes yesterday after Malaysian palm oil futures jumped to their highest level in two and a half months.
The Indian cancellations could limit the rally in Malaysian palm oil prices, although they could support soy oil prices as some refiners shift to soy oil.
Earlier this month, India raised the basic import tax on crude and refined edible oils by 20 percentage points, which effectively increased the total import duty on crude palm oil to 27.5 per cent from 5.5 per cent.
"The hefty duty hike and the jump in Malaysian prices caught everyone off guard. It created a situation where refiners could make more money by cancelling old purchases instead of refining and selling.
"Sellers are happy too since they can now sell at higher prices to new buyers," said an Indian buyer who operates a refinery on the east coast and cancelled palm oil shipments for October delivery.
India, on average, imports 750,000 tons of palm oil every month, and the cancellation of 100,000 tons represents about 13.3 per cent of monthly imports.
Crude palm oil is currently being offered at about US$1,080 (RM4,506) a tonne, including cost, insurance, and freight, in India for October delivery, compared to around US$980 (RM4,089) to US$1,000 (RM4,172) a month ago, giving profit margin of US$80 (RM333.80) to US$100 (RM417.25) to buyers.
East Coast-based refiners are washing out on contracts by cancelling them and making a very decent profit, said leading importer of edible oils Patanjali Foods Ltd's vice president Aashish Acharya.
India imports palm oil mainly from Indonesia, Malaysia, and Thailand.
"Refiners are not sure about the demand for the December quarter with these higher prices. They are also worried about whether the prices will hold.
"That is why they are cancelling contracts," said vegetable oil brokerage and consultancy firm Sunvin Group's chief executive Sandeep Bajoria.
Price-sensitive Asian buyers traditionally rely on palm oil due to its low cost and quick shipping times. However, with the recent rise in prices, palm oil is now trading at a premium over soy oil.
Buyers will prefer buying cheaper soy oil and sunflower oil for winter months than expensive palm oil, said a Mumbai-based dealer with a global trade house.
Indonesia's palm oil producer association GAPKI hoped the recent changes in Indonesia's export levy could boost global demand for the edible oil, especially from India, the group secretary general Hadi Sugeng said late yesterday.
The world's biggest palm oil exporter Indonesia last week lowered its palm oil export levy to improve competitiveness against rival edible oils.
India's palm oil imports usually moderate during winter months as the tropical oil solidifies at lower temperatures.
India buys soybean and sunflower oil mainly from Argentina, Brazil, Russia and Ukraine.
— Reuters
