Indian refiners cancel orders for palm oil after price surge
MUMBAI — Indian refiners have canceled orders for 100,000 metric tons of crude palm oil (CPO) scheduled for delivery between March and June, because of a surge in benchmark Malaysian prices and negative refining margins in India, trade sources said.
Refiners in the world’s largest importer of palm oil canceled the quantity over the last four days, including 30,000 metric tons on Friday, after Malaysian palm oil futures rose more than 11% over four weeks.
The Indian cancellations could limit the rally in Malaysian palm oil prices, although they could also support soy oil prices as some refiners shift to soy oil.
The trade sources spoke on condition of anonymity because they were not authorized to speak to the media.
One Indian buyer, who operates a refinery on the east coast and canceled palm oil shipments for March delivery, said the combination of negative refining margins in India and high overseas prices meant it made sense to lock in profits by selling palm oil back to suppliers, rather than importing it.
Price-sensitive Asian buyers traditionally rely on palm oil due to its low cost and quick shipping times. However, the recent price rise has pushed palm oil to a premium over soy oil on the global market.
An influx of soy oil into India between February and March, priced slightly lower than palm oil, has prompted some refiners to cancel their palm oil purchases to switch to soy oil, Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil brokerage, said.
A Mumbai-based dealer with a global trade house said buyers and sellers were mutually agreeing to cancel contracts, with buyers accepting a slightly lower price than the current market rate for cancellations.
Crude palm oil is being offered at about $1,210 a ton, including cost, insurance and freight, in India for March delivery, compared to around $1,120 to $1,130 a month ago.
India’s palm oil imports, which are primarily from Indonesia and Malaysia, in January fell 45% from a month ago to 275,241 metric tons, the lowest in nearly 14 years, as refiners turned to cheaper soy oil. The soy oil is imported mostly from Argentina and Brazil.
Market speculation India will raise its import duty on palm oil to support local oilseed farmers has also prompted some refiners to cancel contracts and book profits, said a New Delhi-based dealer with a global trade house. — Reuters
