Jakarta: Palm oil exports from Indonesia to India, the world’s biggest buyer, will probably climb to the highest ever this year as strong demand counters higher import duties.
Shipments of palm and kernel oils to India climbed 32% to record 7.6 million metric tons in 2017 from a year earlier, according to the Indonesian Palm Oil Association, commonly known as Gapki. Exports are likely to advance further this year to keep pace with the South Asian country’s population and economic growth, the association’s secretary general Togar Sitanggang said, without providing any estimate.
India, which relies on imports to meet about 70% of its total vegetable oil requirements, doubled the levy on crude palm oil to 30% in November and increased the duty on refined palm oil to 40% from 25%. The move, coupled with high inventories in top producers Indonesia and Malaysia, resulted in palm oil prices dropping 19% last year.
“India’s import duty hike will likely be temporary," Sitanggang said in text messages. “Now they feel they need to protect" their farmers and local output from imports. That stand may change and the duty may be cut again to meet the country’s edible oil demand, he said.
India may also consider a request from Indonesia’s president Joko Widodo to reduce the levy, said Derom Bangun, chairman of the Indonesian Palm Oil Board.
Palm oil exports from Indonesia may rise at least 10% this year, Sitanggang said. The nation registered a 23 percent jump to 31.05 million metric tons last year from 2016, Gapki data showed. Total shipments to the European Union, the second-largest market, and China climbed about 15%, it said last week.
While India and the EU will remain as Indonesia’s top palm oil buyers, the Southeast Asian country must seek other markets to reduce the risk from trade hurdles, Bangun said in a telephone interview.
“There are plenty of opportunities" to expand the market, Bangun said. "Gapki and the trade ministry have visited Chile, the Middle East and Turkey to discuss ways to increase exports and counter the threats." Bloomberg