India and Malaysia close trading ties as buyers capitalize on cheaper palm oil

29 Jul 2022 --- India plans to acquire almost five million metric tons of palm oil from Malaysia until the end of the year. This is a 20% increase compared with the first six months of 2022 when palm oil prices skyrocketed and marked price records. Now, cheaper oil is set to flood Asian markets, as inventories are full to the brim. 

Indonesia’s short-lived palm oil export ban had long-lasting effects on stockpiles, as the country now struggles to reduce its reserves while keeping prices from falling too steeply.

Indonesia holds so many reserves that it is implementing a mandatory 35% palm oil mix for its biodiesel, up from the current 30% blend.

While Indonesia was banning exports, Malaysia set out to capture market share in the palm oil market by reducing taxes on its exports and boosting production. The country is reaping the benefits of being a stable and reliable business partner.

“The supply chain was maintained very well and Malaysia played a crucial role in the edible oil security for India’s demand in the last two months,” says Sudhakar Desai, president of the Indian Vegetable Oil Producers’ Association (IVPA).

“Currently, India’s import for palm oil is about eight million tons and we do expect the Malaysian market share to continue to be 55% out of it,” he notes.

India and China are boosting their imports of palm oil.Memorandum of understanding
India’s IVPA has inked a deal with the Malaysian Palm Oil Council to improve cooperation between the two bodies, with aims to solidifying a better demand and export performance.

The agreement will allow the exchange of information concerning sustainability efforts, as well as data exchange and collaboration in the research and development in the area of palm oil, according to the signing parties.

Desai thanked Malaysia for keeping a reliable policy regarding palm oil and meeting India’s demands during the difficult month when Indonesia banned palm oil exports.

China boost stockpiles
With the ease in palm oil prices, China is intensifying its purchasing efforts. The country bought 96,495 metric tons of the product in June, up from 85,123 metric tons in May, according to the Malaysian Palm Oil Board.

China is also pledging to increase its supply coming from Indonesia.

“Thank you very much for China’s commitment to add their crude palm oil import volume from Indonesia. This will help us improve the welfare of around 16 million local palm oil farmers here in Indonesia,” says Luhut Pandjaitain, minister for maritime affairs and investment of Indonesia.

“We hope China can keep helping Indonesia by increasing our palm oil trade,” he continues.

By Marc Cervera