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India’s Palm Oil Imports Seen to Slow

Buying less: India is one of the biggest importers of palm oil in the world, but a spike in COVID-19 cases, leading to a lockdown, is seen to slow its purchase of the commodity.

The sustained spike in COVID-19 infections in India, one of the biggest crude palm oil (CPO) importers, could see the flow of the commodity into the country slowing for the months of May and June.

This could happen due to the current lockdown, which requires the temporary closure of hotels and restaurants, said TA Research.

“The hotel, restaurant and cafeteria segment accounts for 40% of the country’s total edible oil demand of 23 million tons annually,” it said.

Industry statistics by the Solvent Extractors Association of India showed that the country bought about 1.68 million tons of CPO from Malaysia and 1.29 million tons from Indonesia from November 2020 to March 2021.

The statistics showed that the total stock of edible oils as of April 1 had decreased to 1.68 million tons, which is 16% below the five-year average of 2.0 million tons.

“Besides the pandemic-led demand slowdown, the decline in palm oil exports to India in May and June could also be aggravated after the (anticipated) Ramadan restocking activities,” it said.

“Based on India’s monthly consumption of 1.9 million tons during the normal period, its current stock of 1.68 million tons suggests that India would be running out of palm oil by the end of June without significant imports,” TA Research added.

This stock level, which is deemed threatening, makes it believe that palm oil exports to India would recover significantly once the COVID-19 pandemic in the country is under control.

TA Research is also anticipating for its imports to rebound from July onwards with the resumption of restocking activities upon the upliftment of lockdowns should the COVID-19 infections decline.

It cited also India-based scientists from IIT Kanpur and Hyderabad, who are predicting that daily COVID-19 cases in India may peak at 440,000 between May 14 and 18.

Meanwhile, CGS-CIMB said in its report that it believes that rising CPO stocks in the country could limit the CPO price upside.

“Malaysia’s palm oil stocks rose 7% from the previous month but fell 24% from the previous year to 1.55 million tons as at end-April.

“This is due mainly to higher output and lower local usage. The stock level at end-April was 5% above our forecast of 1.47 million tons, due mainly to lower-than-expected domestic consumption, likely on rising cooking oil prices,” CGS-CIMB said.

“The palm oil stockpile level still remains tight relative to historical levels (the past ten-year April month average inventory was at 1.98 million tons), ” it added.

Moving forward, it expects Malaysian planters to report better year-on-year (y-o-y) first-quarter 2021 earnings, as the higher CPO price that gained some 48% y-o-y more than offset the lower output of -5% y-o-y.

TA Research has kept its “overweight” recommendation on the plantation sector, while CGS-CIMB has maintained its “neutral” stance on Malaysian planters.


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