Indian oil refiners have cancelled purchases of 1,00,000 metric tons (MT) of palm oil scheduled for delivery between October 2024 and December 2024. 

They took this action in response to New Delhi’s decision to increase import duties due to a surge in global prices. This move could affect Malaysian palm oil prices and lead to an increase in demand for soy oil.

According to five trade officials who spoke to Reuters, Indian refiners have cancelled 100,000 metric tons of palm oil orders for delivery between October and December. The decision to raise import duties in response to soaring global prices prompted the refiners to seek profits.

Over the past four days, refiners in the world’s largest palm oil importer have cancelled this quantity, including 50,000 tons on Monday. This decision follows a spike in Malaysian palm oil futures to their highest level in 2-1/2 months.

The cancellations by Indian buyers may limit the increase in Malaysian palm oil prices while potentially boosting soy oil prices as some refiners switch to soy oil.

Earlier this month, India raised the basic import tax on crude and refined edible oils by 20 percentage points. India raised the total import duty on crude palm oil to 27.5% from 5.5%.

A buyer from India who operates an East Coast refinery and cancelled palm oil shipments for October delivery stated that the hefty duty hike and the surge in Malaysian prices caught everyone off guard.

The Indian buyer explained, “It created a situation where refiners can make more money by cancelling old purchases instead of refining and selling. Sellers are happy too, since they can now sell at higher prices to new buyers.”

India imports 7,50,000 tons of palm oil every month, and the cancellation of 1,00,000 tons represents about 13.3% of the monthly imports.

For October delivery, crude palm oil (CPO) is currently being offered at about USD 1,080 a ton, including cost, insurance, and freight (CIF), in India, compared to around USD 980 to USD 1,000 a month ago. This provides buyers with a profit margin of USD 80 to USD 100.

Aashish Acharya, vice president at Patanjali Foods Ltd, a leading importer of edible oils, mentioned that East Coast-based refiners are cancelling contracts and making a decent profit.

Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil brokerage and consultancy firm, explained that refiners are still assessing the demand for the December quarter with these higher prices and are concerned about whether the prices will hold, prompting them to cancel contracts.

Traditionally, price-sensitive Asian buyers favour palm oil due to its low cost and quick shipping times. However, with the recent price rise, palm oil is trading at a premium over soy oil.

A Mumbai-based dealer with a global trade house stated that buyers would opt for cheaper soy and sunflower oil for the winter months rather than expensive palm oil. 

During winter, India’s palm oil imports tend to decrease as the tropical oil solidifies at lower temperatures. India mainly imports soybean and sunflower oil from Argentina, Brazil, Russia, and Ukraine.

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