Weekly Product Updates

W6 Palm Oil Update: India's Palm Oil Imports Hit Three-Month Low, Malaysian Palm Oil Inventories Expected to Decline by 6.62% MoM in Jan-24

RBD Palm Oil
Published Feb 22, 2024
In W6 in the palm oil landscape, Malaysia's palm oil inventories in Jan-24 are expected to decline to 2.14 mmt, with CPO production decreasing by 11.83% MoM to 1.37 mmt. This drop in production, coupled with reduced exports by 8.65% to 1.22 mmt, signifies a shift in supply and demand dynamics in the palm oil market, potentially leading to a rise in CPO prices. In India, palm oil imports declined to a three-month low in Jan-24, primarily due to increased purchases of rival soybean oil by refiners. Despite challenges faced by the Indonesian palm oil industry, including threats from China and potential blockage of CPO products in Europe, the sector has shown resilience, with export values trending upwards from 2021 to 2022, highlighting its ability to adapt and thrive in uncertain economic conditions.

Malaysia's Palm Oil Inventories Projected to Decline in Jan-24

Malaysia's palm oil inventories in Jan-24 are projected to decrease to 2.14 million metric tons (mmt), marking a 6.62% month-on-month (MoM) decline from Dec-23, based on the average estimate of traders, planters, and analysts. Crude palm oil (CPO) production amounted to 1.37 mmt, down by 11.83% MoM, with a significant decrease in production anticipated from Jan-24 to Mar-24. There is a shift in supply and demand dynamics in the palm oil market, highlighting a notable production drop of 11 to 14% during the same period, potentially further reducing supply. Exports are expected to decrease by 8.65% to 1.22 mmt due to weakened demand amid limited distribution of competing vegetable oils and winter conditions in key destination markets.

Malaysian CPO Prices Forecasted to Surge Temporarily Amid Low Output and High Demand

Malaysian CPO prices are expected to rise due to the low output cycle, limited competition from other oils, and heightened demand leading up to Ramadan. The forecast suggests that the CPO price may briefly exceed USD 881.06 per metric ton (mt) from Feb-24 to Mar-24. However, a downward trend is projected for the CPO price by mid-2024, as supplies increase with the arrival of new South American harvests and expectations of CPO output recovery in the latter half of the year. While positive momentum is expected in Feb-24, driven by low output and inventory drawdown, the upside for CPO price could be constrained by competition from alternative oils and gasoil.

India's Palm Oil Imports Hit Three-Month Low in Jan-24

India's palm oil imports declined to a three-month low in Jan-24, attributed to increased purchases of rival soybean oil by refiners due to negative refining margins for CPO . This decrease in imports, especially for palm oil, amounted to a 12% MoM, totaling 787 thousand mt, with CPO imports falling by 16% MoM to 541 thousand mt. The decline in palm oil imports was primarily driven by reduced CPO buying, as refiners favored refined bleached deodorized (RBD) palm olein.

Challenges and Resilience in Indonesia's Palm Oil Industry

The performance of the Indonesian palm oil commodity industry in 2024 continues to encounter numerous challenges, particularly stemming from the global economic slowdown and potential threats from China that could impact export demand and prices. Additionally, there is concern about the potential blocking of Indonesian CPO products in Europe due to the Anti-deforestation Law or European Union Deforestation Regulation (EUDR). These challenges compound existing obstacles faced by the palm oil trade in Europe, including regulations such as the Renewable Energy Directive 1 (RED-1) and its subsequent iteration, RED-II, along with implementing regulations like Delegated Regulation.

Despite these obstacles, the industry has demonstrated resilience, with export values showing an upward trend from 2021 to 2022 before dipping slightly in 2023. Palm oil production also experienced growth over the same period, indicating the industry's ability to adapt and thrive even in uncertain economic conditions.

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