Commodities cool down: crude, edible oil decline; steel to soften on global meltdown

After rising steadily for last one year, the prices of critical commodities like edible, crude oils and steel have sharply declines, which would impact the rising graph of inflation.

While international prices of crude oil at the New York Mercantile Exchange on Monday was traded at $116.57 a barrel, down from all time high of $147.27 a barrel in Mid July, the prices of Palmolein and Soyabean oils in the international market have softens.

Both the decline in crude and edible oils is significant to the government?s fight against double digit inflation as domestic prices are impacted by volatility in the international market. India imports close to 70% of its crude oil needs and around 50% of edible oil needs.

Even the union steel minister Ram Vilas Pawan on Monday anticipated that the prices of steel would further drop in the short term.

This may impact the rising inflation graph as domestic edible oil prices have a weightage of 2.75 while import edible oil has 0.046 in inflation index. While the iron and steel has a weightage of 3.63%, the petrol and LPG have combined weightage of around 2.5%.

According to major companies in the branded edible oil sector, as a result of decline in the international prices, the average retail prices of range of edible oils have decline by Rs 7-Rs 8 per litre. However, the prices are expected to remain stable due to rising demand in the forthcoming festive seasons.

?The prices may not decline further as demand usually shots up during September ? December months,? Siraj A Chaudhry, Chief Executive Officer ? Refined Oils, Cargill India Pvt Ltd told FE.

The country imports around half of total 12 million tonnes of edible oil consumption in the country. According to estimates, around 2 million tonne of soyabean oil from Argentina and Brazil while about 3.5 million tonnes of palm oil is imported annually from Malyasia and Indonesia.

?Thus any volatility in the international market, impacts the domestic prices,? BV Mehta executive director, the Solvent Extractors? Association of India (SEAI) said.

In last two months, Crue Palm Oil ,RBD Palmolein ,Soybean Oil prices have gone down by about US$ 350 and Sunflower Oil price has crashed by US$ 630 due to bearish trend in international market.

Factors such as the high stock of palm oil in Malaysia, rollback of soyabean oil duty by Argentina and increased production of sunflower seed in Northern Hemisphere is attributes to fall in the international prices. Malaysia has all time high stock of 1.9 million tonnes of palm oil.

According to Chaudhry of Cargill, the decline in the domestic prices have been marginal because of most of the processors have stocks of more than one month.

While the retail prices in the Delhi for Soyabean oil has been around Rs 68-70 per litre, while Sunflower oil and Palmolein oil have been selling at the price band of Rs 75-80 per litre and Rs 55-60 per litre respectively. ?The prices would be stable instead of volatile,? said an official from Adani Agro, a leading player in the edible oil.

Even the World oilseed production is forecasted 416 million tonnes against last year 387 million tonnes. In a bid to curb rising prices of edible oil, the government in March had announced an import duty cut on crude palm oil from 45 to 20 % and that on refined palm oil from 52.5 to 27.5%.