Indian firms renege on veg oil import deals

Indian firms renege on veg oil import deals

New Delhi: India’s vegetable oil traders are reneging on contracts to import palm oil as they expect benchmark Malaysian prices, which sank to a nine-month low this week, to fall further, a leading trade official said on 7 August.

A drop in prices and an expected rise in domestic oilseed output due to a revival in monsoons were likely to spur the government to reimpose an import tax on crude vegetable oils, Solvent Extractors’ Association of India President Ashok Sethia told Reuters.

It could also allow limited exports of some oils, he said in an interview.

India, the world’s biggest vegetable oil importer after China, in April allowed duty-free imports of crude vegetable oils and cut the levy on refined oils to 7.5%.

In March, the government had banned exports of all vegetable oils for a year despite tiny overseas sales.

“Amid falling prices, Malaysian traders complain that some Indian traders are backing out of deals and have stopped issuing letters of credit," Sethia said.

“There are expectations that prices will drop further."

Malaysian crude palm oil futures fell about 1% on 7 August as worries about faltering crude oil and slower overseas demand weighed on the market.

By the midday break, the October contract on the Bursa Malaysia Derivatives Exchanges had eased 31 ringgit, or 1.1%, at 2,759 ringgit ($840) a tonne.

Prices of palm oil, which is used in products from soap to margarine and biodiesel, are now trading 38% lower than an all-time high of 4,486 ringgit a tonne hit in early March.

Estimates that global oilseed output would reach 411 million tonnes in the year to September, up from 382 million tonnes a year ago, would also weigh on the market, Sethia said.

“People are optimistic that crude palm oil palm oil will touch $750 by the end of September when ne w crops arrive in India and other countries too," he said.

Domestic prices have also fallen in line with the overseas markets and might drop further on global cues and hopes of better oilseed crop at home, he said.

In the last 15 days, palmolein has dropped to Rs485 ($11.6) per 10kg from Rs540, while soyoil has fallen to Rs630 per 10kg against Rs670, Sethia said.