Global edible oil consumers have no choice but to pay top dollar for supplies following Indonesia’s surprise palm oil export ban, with buyers already in short supply due to adverse weather and Russia’s invasion of Ukraine. has been forced to.
Industry watchers anticipate that the move by the world’s largest palm oil producer to ban exports from Thursday will push up prices of all major edible oils, including palm oil, soya oil, sunflower oil and rapeseed oil. This will put additional pressure on cost-sensitive consumers in Asia and Africa affected by high fuel and food prices.
“Indonesia’s decision affects not only the availability of palm oil, but also vegetable oils around the world,” James Fry, chairman of commodity consultancy LMC International, told Reuters.
Palm oil – used in everything from cake and frying fats to cosmetics and cleaning products – accounts for about 60% of global vegetable oil shipments, and top producer Indonesia accounts for nearly a third of all vegetable oil exports. It announced export restrictions until further notice on April 22 to deal with rising domestic prices.
“This is happening when exports of all other major oils are under tons of pressure: soybean oil because of drought in South America; rapeseed oil because of devastating canola crops in Canada; and sunflower oil because of Russia’s war on Ukraine,” Mr. Fry said.
From labor shortages in Malaysia to droughts in Argentina and Canada – the biggest exporters of soy oil and canola oil respectively – vegetable oil prices have risen more than 50% in the past six months.
Buyers were hoping a bumper crop of sunflowers from top exporter Ukraine would ease the crunch, but supplies from Kyiv have been cut off as Russia calls its “special operation” in the country.
Atul Chaturvedi, president of the trade body of the Solvent Extractors Association of India (SEA), said this had prompted importers to bank on palm oil to be able to plug the supply gap until Indonesia’s shock sanctions. didn’t give buyers a “double whammy”.
no option
Chaturvedi said importers such as India, Bangladesh and Pakistan will try to increase their purchases of palm oil from Malaysia, but the world’s second largest palm oil producer cannot fill the gap created by Indonesia.
Indonesia typically supplies about half of India’s total palm oil imports, while Pakistan and Bangladesh import about 80% of their palm oil from Indonesia.
Rashid Janmoh, president of the Pakistan Edible Oil Refiners Association (PEORA), said, “No one can compensate for the loss of Indonesian palm oil. Every country will suffer.”
In February, vegetable oil prices hit record highs as the supply of sunflower oil from the Black Sea region was disrupted.
A Mumbai-based dealer of a global trading firm said the hike in prices has increased the working capital requirement for oil refiners, who were holding less than normal inventory on anticipation of a fall in prices.
Instead, all oil prices have risen further. “The refiners have been caught wrongly. Now they can’t wait for a few weeks. They have to make purchases to run the plant,” the dealer said.
As Indonesia allows loading until April 28, consuming countries will have enough supplies for the first half of May but could face shortages from the second half, a Dhaka-based refiner said.
He said that South Asian refiners will release oil in the market gradually as they know that the supply is limited.
In India, the world’s largest importer of vegetable oil, palm oil prices rose nearly 5% over the weekend as industry prices eased in the coming months. Prices also increased in Pakistan and Bangladesh.