Traders are watching the spread of the coronavirus in India and China, the top palm oil importers, to determine how prices will move in the coming weeks, particularly after the biggest producer, Indonesia, announced an export ban on the cooking oil.
For now, demand in India is robust, bolstered by the recovery of its hotel, restaurant and catering segment and by favourable taxation, according to a report by the Council of Palm Oil Producing Countries (CPOPC).
But coronavirus infections are rising in the South Asian nation. Prime Minister Narendra Modi will discuss the matter at a virtual meeting with the chief ministers of various Indian states, on 27 April, the news agency ANI reported.
In the meantime, the demand for the edible oil has dropped in China following coronavirus-triggered disruptions to activity. Authorities in Beijing have reportedly begun mass Covid-19 testing of all residents in the city’s most populous district. Elsewhere, the lockdown of the financial hub of Shanghai continues, in a bid to curb the massive surge in infections there.
Prices to stay above $1,000
“At the close of trading last week, market sentiment in the palm oil market was mixed”, according to a Mintec pricing update published on 19 April. The Mintec benchmark prices for Palm Oil CIF Rotterdam hovered at $1,740/mt, up $60.50/mt on the week, it added.
Mintec, which provides global commodity price data, put down that mixed sentiment “to concerns over a lack of demand from China in the wake of widespread lockdowns.”
“Despite this the MPOB (Malaysian Palm Oil Board) release showed stock levels declining 3% m-o-m, contrary to market expectations ahead of the report which predicted an increase in stocks for the first time in six months. The contrasting sentiment has market participants split on where the market may move in the coming weeks,” Mintec analysts wrote.
The Indonesian Palm Oil Association (IPOA), locally known as Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI), expects palm oil to stay above $1,000 per tonne in the first half of 2022 and potentially for the rest of 2022, the CPOPC report noted.
Malaysia is the world’s second-largest exporter of palm oil. The Southeast Asian nation and Indonesia, together, produce about 85% of the world's palm oil needs.
Golden Agri-Resources (GAR) is the largest private oil palm grower in Indonesia, with a planted area of around 536,000 hectares, or about three times the size of London. The firm, part of the Sinar Mas conglomerate, is also among the largest palm oil refiners in Indonesia with 47 mills.
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Bumitama, part of the Harita Group, is an Indonesia-based investment holding company engaged in crude palm oil (CPO) and palm kernel (PK) production.
First Resources is a Singapore-based producer, managing some 213,461 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia.
Taming food inflation
Indonesia's move to halt palm oil exports will hurt other countries, but it is necessary to try to bring down the soaring domestic price of cooking oil, Finance Minister Mulyani Indrawati told Reuters last week.
Local demand exceeds supply and prices have risen since the war in Ukraine, Indrawati added. The European nation accounts for almost half of all global sunflower oil exports, another staple.
Meanwhile, palm oil accounts for almost 60% of global vegetable oil shipments.