26/11/06 KARACHI (Business Recorder): Palm oil prices in the international market have shot up by $100 per ton in the wake of skyrocketing prices of oleo chemicals besides increased consumption of bio-diesel and food items, industry sources said on Saturday.

They said that the international prices of crude palm oil have reached $575 per ton in last 25 days. This has badly affected the import process, which has almost come to a standstill. "Last month, palm oil prices in the international market were $475 per ton," they added.

In the domestic market, refined palm oil prices have gone up by Rs 100 to Rs 150 per 16 kg, which is now available at Rs 950 per 16 kg tin. However, the major reasons behind the upsurge of palm oil prices in the international market have been its increasing unconventional use in three different categories--conversion to bio-diesel for fuel purposes, use in production of soap cosmetics and soap noodles, and in food items. Earlier, palm oil was used for food purposes only as edible oil but with the help of advanced research now this is being converted into other uses.

Sources forecast that serious shortage-like situation could emerge in the local market due to absence of larger production of palm oil internationally as compared to its increasing consumption.

"Palm oil consumption has gone manifold higher than in the past while its production is still not meeting the market demand which will affect its prices at large and consequently shortage-like situation may prevail," they added.

Regarding palm oil imports, they estimated that currently it was normal and might continue till December. However, a sharp decline was expected to take place due to its high prices in international market. "On such high prices, no importer will go to take risk and certainly it will never be feasible for them to bid," they said.

About local market, they said that a negative impact had occurred in the local market, which had brought about the price increase of palm oil and pointed out that the domestic market was in a volatile zone.

"Currently, local market is being supported by cottonseed oil, which is available in large quantity. However, as soon as cottonseed oil supply exhausts, prices of palm oil will soar," they said. "Now, after wheat flour and sugar prices surge in the local market, hike in prices of palm oil will hit the market," they said.

They said that current stocks of palm oil are sufficient for demand till December-end. However from January 2007 onwards palm oil prices and supply crisis will set foot in the market in the wake of skyrocketing international prices of palm oil, soya oil and rape-seed oil, they added.