Wednesday October 6, 2:25 PM KUALA LUMPUR (Dow Jones)--Pakistan's palm oilimports, which surged in the last two months, are expected to slow duringthe rest of the year with full-year intake unlikely to exceed the 2003total, an industry official said.

Pakistani demand for imported edible oils will weaken in the fourthquarter because of ample domestic stocks, stronger domestic oilseedsproduction and higher oilseeds imports, said Nasir Ibrahim, director ofSadiq Vegetable Ghee Mills (Pvt) Ltd in Lahore.

Pakistan, among the world's top four importers of palm oil, had beenaggressively buying from producers Malaysia and Indonesia in the past twomonths.

Ibrahim said in September alone, palm oil shipments to Pakistan wereestimated around 200,000 tons, about double of the country's usual monthlyimport volume.

But imports are likely to slacken in the next two months because therecent buying appeared overdone, he said.

After being caught in an unexpected rally in edible oil prices at thistime last year, importers decided to stock up this year, Ibrahim said.

"Importers were anticipating some kind of (rally) again, so they ended upimporting huge quantities," he said.

"Since Pakistan (bought) such huge quantities in August and September, wedon't expect good demand in October and November. October and Novemberimports will be pretty low," he added.

Edible oil prices surged in the last quarter of 2003 because of poor U.S.soybean production. This year, however, a repeat appears increasinglyunlikely because estimates so far indicate a possible bumper U.S soybeancrop.

PAKISTAN'S EDIBLE OIL IMPORTS SEEN FLAT IN 2004

Talk of a potentially large soybean harvest in the U.S has dragged edibleoil prices down in the past few weeks, with the Malaysian CPO futuresmarket testing its lowest level this year late last month beforerebounding slightly in recent days.

Unlike in 2003, edible oil prices appear more likely now to be headingdownward in the coming months.

"If the U.S. harvest turns out to be higher than last year, we're lookingat a bearish market from November onwards. Since people are not expectinga friendly market, they are not in the mood to import (further largequantities)," Ibrahim said.

The aggressive imports in the past two months has also caused domesticstocks to build up, resulting in weak selling prices.

"There is in fact a negative margin," he said.

Domestic retail prices were around $7.5 to $10 a metric ton below thecurrent import prices, Ibrahim said, adding this would limit import ofpalm oil in the coming months.

Pakistan's requirement for imported palm oil would also ease in the nextfew months because of the arrival of the country's domestic cottonseedcrop.

"We will get about 100,000 tons of cottonseed oil every month for fourmonths from October onwards. The total cottonseed oil availability isexpected to be about 400,000 to 450,000 tons," Ibrahim said.

Pakistan's cotton crop is usually harvested from mid-September to January.

In addition to oil from indigenous cottonseed, a large quantity of oilderived from crushing imported oilseeds will also reach the Pakistanmarket in months ahead.

Ibrahim said it is estimated that freight bookings for imported oilseeds,mostly rapeseed from Australia and Europe, have reached a total 300,000tons for September, October and November.

Overall, Pakistan's edible oil imports for the full year isn't expected toexceed an estimated 1.4 million tons imported in 2003 because consumptionhas shown little growth this year.

"With regards to Pakistan's oil requirements, it's going to be the samelevel as last year, or maybe a little less," Ibrahim said.

INDONESIA GAINING MARKET SHARE IN PAKISTAN

Pakistan buys most of its palm oil from Malaysia, the world's largestproducer.

However, Indonesia is fast eroding Malaysia's dominance in the Pakistanmarket as the country's production has been rising rapidly.

Lower wages and vast available land has helped keep production costs lowin Indonesia, resulting in cheaper selling prices of palm oil products.

Though logistical problems and doubts about quality of the oil produced inthe country still linger, Indonesia's price advantage has helped boost itsshare of the Pakistan market lately.

"People who have refineries in Malaysia are also exporting out ofIndonesia because the oil there is $2.5 to $5 cheaper," Ibrahim said.

"If in the past few years, Indonesia's market share was around 10 to 15%.Nowadays, it's about 40% of the market share," Ibrahim said.

"Indonesia is (also) capturing the Pakistan market."