Last week, India slapped curbs on imports of refined palm oil and informally asked traders to halt all palm imports from Malaysia, the world’s second biggest producer.
The step followed repeated objections by India’s Hindu nationalist government to comments by Mahathir Mohamad, the prime minister of Muslim-majority Malaysia, against some recent policies that critics say discriminate against Muslims.
Indian traders said they have turned to top producer Indonesia to buy palm instead, and are also taking a small amount from Thailand.
“Higher prices of palm oil and limited cargoes from Indonesia would reduce India’s palm oil imports,” said Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil importer based in the commercial capital of Mumbai.
The drop in Indian purchases could limit the rally in Malaysian palm which has surged more than 45 per cent in the last six months, making rival edible oils more attractive to buyers.
New Delhi’s palm oil imports in the marketing year to Oct. 31 could fall to between 8.4 million and 9 million tonnes from 9.4 million last year, a spot survey of six industry officials showed.
Indonesia will struggle to meet Indian requirements in the next two months, said Govindbhai Patel, managing director of trading firm G.G. Patel & Nikhil Research Company.
But the situation will change gradually as buyers of Indonesian oil shift to Malaysia, lured by its discount over supplies from Jakarta, Patel added.
“This will make supplies available for India in Indonesia,” he said.
India meets nearly two-thirds of its edible oil demand through imports and palm makes up the bulk because of its lower price.
But palm’s rising prices are also turning Indian buyers towards soyoil and sunflower oil, which are seen as having health benefits, traders said.
Palm’s discount to soyoil and sunflower oil has narrowed to $ 60 per tonne from $ 205 in July 2019, data from a Mumbai-based trade body, the Solvent Extractors’ Association, shows.
“Soyoil and sunflower oil have become very attractive at the current price level,” said Patel.
India’s imports of soyoil in 2019/20 could rise 20 per cent from a year ago to 3.6 million tonnes, while sunflower oil could jump 28 per cent to 3 million, the spot survey showed.
India imports soyoil mainly from Argentina and sunflower oil from Ukraine and Russia.