Mumbai (Commoditiescontrol) – Indian palm futures opened on firm note with strength in Malaysian front however lost the momentum by mid-week due to fall in soya and energy sector and finally settled lower by 1.5% on weekly basis at INR 567.1.
Indian Govt last week revised the tariff base value across all the imported veg oils. As per new structure: CPO base value in $/tons will be - 552/ Vs 544, RBD palmolien 583/vs. 556 and Crude soyabean oil 734/ vs.686. The new increased values are in-line with last fortnight average prices. Based on the recent market value Gov. revises the base tariff value in every two weeks.
Meanwhile, as per SGS recent data, Malaysian full month exports were pegged near 1.45 million tons, higher by 8.5% on m-o-m basis, however much below the market anticipation of 15-18%. The major destination was EU wherein imports surged by almost 63% from 2.5 lakh tons imported in Dec’19 to 4.05 lakh tons. The demand remained bleak from India and China as exports to these destinations dropped by 9% and 18% respectively on monthly basis. India imported 2.35 lakh tons while China imports were near to 2.64 lakh tons.
According to SGS estimates, Malaysian RBD palm olein shipment to India is likely to reach a record high in January to a fourfold increase to 90,500 tons from the usual monthly volume of 20,600 tons. Although Indonesia is by far the largest exporter commanding 70% of the pam olein export market in India, the export share is likely to be slightly diminished in January. India imports an average of 177,000 tons of RBD palm olein and 630,000 tons of CPO a month. However, in January, India RBD palm olein imports are estimated to reach 250,000 tons with Malaysia accounting 90,500 tons or 36% of the total, while Indonesia accounting for the remaining bulk. Increase in RBD palm olein imports shall significantly impact the domestic refining industries in medium term.
Further, full month Malaysian January production is expected to show a 10 to 13% decline from December inline with seasonal yield patterns. Last overall production estimate for 1-20 January from MPOA showed output down 12.40%, with all the 3 regions showing double digit percentage decline. Sarawak showed the most decline by 21.10%, while Peninsular Malaysia slumped the least by 10.60%. Full month January output will show Sarawak as the main slack, dragging overall values down. Sarawak accounts for 20% of total Malaysia CPO production. The lower production is expected to help trim the record high stocks against improved exports.
At Indonesian front, long over-due GAPKI data for December will wrap up 2018. Focus will be on year-end stocks expected to show a decrease of 6—17% to 3.24 to 3.65 million tons or 9 months low from 3.890 million tons in November. Stocks are expected to decline in response to lower production and steady domestic consumption after 4 months of successive rise. Domestic consumption been rising since August recording new highs every month to 1.463 million tons in November buoyed by increased absorption of CPO in biodiesel production to meet the expanded B20 mandate. A drop of below 17% in stocks will give further boost to CPO prices from current 2300 levels on the benchmark month. However, this cannot mask the record high stocks currently in Malaysia at 3.215 million tons which will continue to linger on prices if exports don't increase significantly.
The trade activities are likely to remain muted at domestic front during next week as Dalian and Bursa Commodity exchanges shall remain closed till 7th of Feb as the country enters the most important holiday of the year – ‘Chinese Lunar New Year’. (BMD will be on half day on Monday 4th of February and closed on the 5th and 6th for Lunar New Year festival. Normal trading resumes on Thursday 7th of February). Moreover, bearish signals in neighboring soy oil market shall cap any aggressive gains in the short run.
(By Commoditiescontrol Bureau)
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