KUALA LUMPUR: A commodities consultant says India’s move to restrict palm oil imports from Malaysia could actually be a blessing in disguise, particularly for the downstream industry.
Speaking at the Malaysian Palm Oil Board’s Palm Oil Economic Review and Outlook Seminar 2020, UK-based James Fry said India wanted to “more or less” only import crude palm oil (CPO) and that there were calls for New Delhi to limit the import of refined palm oil to 50,000 tonnes a month.
“What Malaysia would like to do is (go for) more valued-added, more refined palm oil products.
“If India won’t buy from Malaysia, then Indonesia has to supply it all and traditionally, Indonesia has not sold all the palm oil to India,” he said.
Fry sees Indonesia as having to fill the void and this will mostly be in the form of CPO. As Indonesia is increasing its use of biodiesel, he said, the country would not have much of a surplus to export.
He said Indonesia cannot continue to fill the demand for refined oils as they did in 2019 while also meeting India’s need for CPO. This will create a gap in the huge refined oils market.
According to him, most countries including China and the United States import refined oils rather than CPO as the refining process created byproducts other than olein which countries did not want.
“Many countries just want cooking oil, so Malaysia will benefit indirectly. Refined oil from Malaysia will go to countries which have been buying from Indonesia,” he said.
Though this would not be a “wholesale switch”, Fry said it would see millions of tonnes of what Malaysia was selling in CPO now being sold as refined oil to other markets.
“It’s a kind of zero sum game,” he said, adding that Malaysia was the only country which could fill the gap left by Indonesia for refined palm oil.
In this sense, he said, India’s curbs on Malaysian palm oil was a blessing in disguise.
Fry said utilisation of refineries in Malaysia was still low and there was capacity to refine more palm oil.
The Indian government is reported to have put restrictions on refined palm oil imports to protect domestic refiners.
Earlier today, Reuters, quoting unnamed officials, also reported that India was planning to widen its restrictions on imports from Malaysia to include petroleum, liquefied natural gas and computer parts, following Prime Minister Dr Mahathir Mohamad’s criticism of New Delhi’s policies, including on the Kashmir issue and India’s new citizenship law.
However, Indian Commerce Minister Piyush Goyal later said his government has not imposed any curbs on imports from Malaysia.
He said any curbs will apply to all countries uniformly “and if some of the restrictions impact Malaysia, I don’t think that will be the only country impacted”.