Chennai, March 26 : After holding to its ground against the latest duty increase on the import of RBD (refined, bleached and deodorised) palmolein oil for nearly three weeks Malaysia has finally succumbed to the pressure of its huge inventory and has started dropping prices since March 20, 2001. Finance Minister Yashwant Sinha had announced a 20 per cent hike in the basic duty on palmolein imports from 65 per cent to 85 per cent. For the first time since India started importing palmolein, Malaysia had hiked its prices following the duty hike. On the earlier three occasions when the India revised the basic duty on palmolein - from 15-25 per cent in December 1999; 25-35 per cent in June 2000 and 35-65 per cent in November 2000 - Malaysia had slashed its prices. In July last year Malaysia had introduced a corresponding drop in it prices from $320 to $350 per tonne to $290 to $300 per tonne, neutralising the duty hike in June. This time from $215 per tonne on February 27 (a day before Budget), it went onincreasing its prices to peak at $265 per tonne on March 19, 2001.One of the many reasons why Malaysia did not react to the duty hike this time was because February is a low production time, the production going down from 10.63 lakh tonne in January 2001 to 8.86 lakh tonne in February. Whereas the previous duty increases were in peak production stages.
But despite an increase in prices, Indian imports did not fall because of the poor domestic oilseeds production. In the first quarter of the current oil year (November, 2000 and October, 2001), around 12.3 lakh tonne of edible oil valued at Rs 1,574 crore has been imported by India. Out of the 5.79 lakh tonne Malaysia exported in the first 20 days of this month, 1.68 lakh tonne was to India.
Malaysia had also ended its ongoing price war with Indonesia, when the governments of the two countries formed World Palm Oil Association and agreed that they will not undercut each other in the market. Earlier, Indonesia was selling at $5 cheaper per tonne. Then, the prices were artificially jacked up in anticipation of buyers from India and China at the `World Palm Oil Price Outlook' held at Kualalumpur on March 8 and 9, 2001.
This conference was attended by around 800 traders, importers, brokers from across-the-world. The upward reaction was also owing to the announcement by the Malaysian government that it will underwrite 5 lakh tonne of palm oil as industrial fuel.
However, the huge inventory of stock in Malaysia owing to its continuously growing production has forced the Commodities & Monetary Exchange of Malaysia to rationalise its price. Also, its exports are hovering at around 8 lakh tonne per month, adding to its closing stocks. And, the traders were dissatisfied with the Malaysian government which is yet to take any action corroborating its promise.
Further, following the overpricing of Palmolein, the price difference between it and the imported soyabean oil (which is preferred in India) had reduced a lot. To keep the price difference between the two attractive enough to merit the choice of palmolein over soyabean oil (priced at around $280 per tonne), Malaysia started decreasing prices from Wednesday. And on Thursday it came down to $240 per tonne. Importers and traders who had hoarded at the pre-Budget prices had made a killing at all the major wholesale trading centres in India . Prices of RBD palmolein in the domestic market had gone up to Rs 225 per 10 kg the day after Budget, from the pre-Budget Rs 205 to Rs 210 per 10 kg. Then, they increased for over two weeks till it peaked at Rs 257 per 10 kg on Wednesday, before dipping to Rs 240 per 10 kg the next day. However, according to sources in the trade, prices in the domestic market are not expected to fall below Rs 225 per 10 kg in near future.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
