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Crude palm oil futures on Malaysia’s derivatives exchange fell sharply Thursday, after major cooking oil consumer India imposed a 2.5% import tax on crude edible oils in a bid to protect its farmers against a surge of cheap imports.
The benchmark April contract on Bursa Malaysia Derivatives ended 2.1% lower at 2,378 ringgit a metric ton, after trading in a MYR2,377/ton-MYR2,442/ton.
" Investors turned bearish on palm oil after India's import tax announcement on concerns this could slow export demand and keep palm oil stockpiles near record levels," a trading executive in Singapore said. Malaysian palm oil stockpiles at end-December reached an all-time high of 2.63 million tons, showed crop data from the government-linked Malaysian Palm Oil Board.
Still, some traders said India's tax imposition may not be completely negative for Malaysia.
" The news is not entirely bearish for Malaysian CPO exporters," a trading executive at a Malaysia-based vegetable oil exporting firm said. " Indonesia has an existing tax of 7.5% on CPO shipments, while Malaysia's rate is set at zero." Thus palm oil from Malaysia is still cheaper, he said.
The world's no. 2 producer Malaysia said in October it would cut export taxes on CPO from Jan. 1, in a bid to regain market share from Indonesia. The export tax rate on CPO for January and February is set at zero, compared with Indonesia's export duty of 7.5% on CPO in January. Both Indonesia and Malaysia account for around 85% of global palm oil exports.
Palm oil could rebound from Thursday's fall, as investors will likely square off riskier positions ahead of the weekend, a Kuala Lumpur-based broker said, tipping Friday's trade in a MYR2,385-MYR2,450/ton range.
In the cash market, refined palm olein for January was offered at $800/ton while cash CPO for prompt shipment was offered at MYR2,230/ton.
Open interest on the BMD was 179,036 lots, versus 175,844 lots Wednesday. One lot is equivalent to 25 tons.
A total of 45,433 lots of CPO were traded versus 35,249 lots Wednesday.