By Rajendra Jadhav and Mei Mei Chu

MUMBAI/KUALA LUMPUR – Malaysia may become the top supplier to India due to Indonesia’s unpredictable palm oil export policies, industry sources claimed.

Indonesia is the biggest producer of palm oil in the world. However, India’s erratic export policies (including the latest ban on April 25th) have forced Indian consumers to rely more on Malaysia. Malaysia’s output is only half that of Indonesia.

Malaysia has taken advantage of Indonesia’s ban on palm oil exports, according to Zuraida Kamaruddin (Malaysia’s Commodities Minister).

Combining lower export taxes with the Indonesian ban could mean that Indonesia’s palm oil exports will drop to 35% from 75% a decade back, according to estimates from Solvent Exporters’ Association of India (SEA), a trade organization for vegetable oils.

B.V. Mehta was the executive director at Solvent Extractors Association of India (SEA), a Mumbai-based organization that trades in vegetable oils.

Malaysians are selling at record-breaking prices, despite the fact that Indonesia is not on the market.

India’s palm oil imports from top suppliers https://fingfx.thomsonreuters.com/gfx/ce/zdpxogzqrvx/IndiaPalmImportsfromTopSuppliersMay2022.png

According to data compiled from SEA, India purchased 1.47M tonnes of Malaysian oil in the first five months. That compares with 982,123 palm oil imported from Indonesia.

India imported approximately 570,000 tonnes palm oil according to estimates by traders in May. There were 290,000 palm oils from Malaysia and 240,000 coming from Indonesia.

India could see its June palm oil imports drop to 350,000 tonnes if Indonesia keeps the export ban in effect for at least two weeks more.

NEW NORMAL?

A flip in Indian palm oils imports would change an existing pattern of Indonesian dominance throughout South Asia.

Indian oil producers feel the need to safeguard their supply chains from any policy shifts that may result after Indonesia’s intervention in the palm-oil market.

You can’t rely solely on Indonesia to run your business. “Even if Indonesia gives you a discount on Malaysia, one needs to ensure supplies from Malaysia in order to mitigate against Indonesian’s unpredictable polices,” said a Mumbai-based refiner.

He stated that refiners sell finished products in advance, and they cannot cancel because the raw material is unavailable.

Malaysia’s palm oil stocks are still very tight, despite a persistent labour shortage which has reduced plantation yields.

Malaysia is short of stocks. “Many producers in Malaysia are sold near,” said an official of a Malaysian company that has plantations across Indonesia and Malaysia.

Malaysia accounts for 40% of Indonesian output, so Indonesian supply cannot be completely replaced.

However, Indian oil buyers are eager to expand Malaysian contracts and decrease their dependence on Indonesia.

Although Indonesia may lift its export ban this month, it is not certain that it won’t restrict exports in the future. An Indian buyer who refused to be identified said that Malaysia’s export policies are far more stable, and this is what they want.