KUALA LUMPUR/MUMBAI (Reuters) - India’s demand for Malaysian refined palm oil is likely to drop sharply in October following a tax hike, curtailing further exports from the Southeast Asian country and leading to higher inventories.
India, the world’s biggest edible oil importer, on Wednesday raised the tax on refined palm oil from Malaysia to 50% from 45% for six months to curb imports and boost local refining.
“India’s palm imports would remain the same, but the share of refined oil will drop to make space for CPO (crude palm oil) in the coming months. As Malaysia was cornering India’s entire refined palm imports, it will obviously take a hit,” said Sandeep Bajoria, chief executive of Sunvin Group, a Mumbai-based vegetable oil importer.
Malaysian palm oil traders said Indian buyers had already started to reduce purchases last week after a government document showed India’s trade ministry recommended raising the tax on refined palm oil imports from Malaysia.
“For September, shipments have already been loaded and are in transit, so India’s refined imports would remain on the higher side,” Bajoria said, adding that for unloaded shipments, especially for October, buyers could request Malaysian sellers to replace refined palm oil with CPO.
“Buyers were afraid of a duty change. Now all refineries are feeling the heat,” a Kuala Lumpur-based trader said.
Malaysian inventories would now rise more than expected, potentially reaching 3 million tonnes by December, as India would favour buying cheaper Indonesian CPO, he said.
India imported over 3 million tonnes of Malaysian palm oil during the first seven months of the year, exceeding annual purchases in 2018 and 2017 of 2.5 million tonnes and 2 million tonnes from Malaysia, data from its palm oil board showed.
“Indian buying helped Malaysia to bring down stockpiles. It cannot rely on India anymore to absorb rising stocks,” said a Mumbai-based dealer.
Reporting by Emily Chow, Editing by Sherry Jacob-Phillips