MARKET DEVELOPMENT
Palm oil closes at record high on India's move to reduce duty
Palm oil closes at record high on India's move to reduce duty
14.02.2022 (www.theedgemarkets.com) - JAKARTA (Feb 14): Palm oil finished at an all-time high, tracking stronger soybean oil and petroleum prices, with India's move to cut a tax on imports seen boosting demand for the tropical oil from the world's biggest buyer.
Futures for April delivery rose as much as 2.2% to RM5,697 a ton in Kuala Lumpur, before ending at RM5,672, a new record closing high for the most-active, rolling contract. Soybean oil, palm's closest substitute for food and fuel, climbed for a fourth day. Firmer petroleum prices also helped as palm's biofuel appeal got a boost.
The palm oil market is getting support from a duty cut in India as the move is likely to increase demand, according to Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. Rising crude oil on the back of Ukraine tensions is also helping, he said.
India lowered the agriculture infrastructure and development tax on the crude variety of the tropical oil to 5% from 7.5%, according to a finance ministry notification on weekend.
"With this reduction, crude palm oil will become more attractive for Indian buyers compared with refined products," said Sandeep Bajoria, chief executive officer of Mumbai-based Sunvin Group. This will help refiners increase their capacity utilisation, he said.
Indian traders bought 40,000 tons of crude palm oil on Monday between US$1,517.50 and US$1,525 per ton, including freight charges, for March shipment, Bajoria said. No purchases of refined palm oil were reported on Monday, he added.
Palm has surged more than 50% in the past year on tight supplies from Indonesia and Malaysia, said Paramalingam Supramaniam, director at Selangor-based broker Pelindung Bestari. A shortage of workers will hamper Malaysia's efforts to ramp up output at least in the first quarter of 2022. The stockpile situation is seen as tight as monthly production is likely to stay below 1.8 million-two million tons, he said.