MARKET DEVELOPMENT
06-09-2001
Low demand hits Malaysia/Indonesia palmoil freight
KUALA LUMPUR, Sept 5 (Reuters) - Palm oil freight rates from Malaysia andIndonesia, the world's top producers, are likely to slide further over thecoming months in the absence of fresh demand from major buyers, brokerssaid on Wednesday.In the past few weeks, freight rates from Peninsular Malaysia and Sumatrain Indonesia were flat at $24-$25 a tonne for the west coast of India andat $19-$20 for the east coast, suggesting the world's largest edible oilimporter was turning its back on palm oil.Rates to India were hovering at $26-$27 a tonne for the west coast and at$21-$22 for the east coast in June/July."Dozens of vessels are still looking for palm oil cargo in Pasir Gudangand other ports. It's been going on for a month," said one broker in KualaLumpur."Normally, we could see more than 10 ships leaving one particular port ina week. It doesn't happen anymore," he added.Peninsular Malaysia/Sumatra share similar freight rates.Brokers said freight rates to various destinations such as India,Pakistan, China and Europe were likely to fall by $1 a tonne in Septemberand the following months because there were almost no new contracts signedin August.Traders and brokers said at least 600,000 tonnes of edible oil, including300,000 tonnes of palm oil from Malaysia and Indonesia, arrived in Indialast month. But the palm oil cargo comes from old contracts."It's a bad sign when freight rates don't change," said another broker.In Indonesia, the normally congested palm oil exports ports in Sumatrawere surprisingly quiet."I just got a call from someone who offered me some space. I was sosurprised because people always have to struggle to find vessels to shippalm oil from Indonesia," said a trader in Jakarta.Traders said India had turned to other edible oil, such as soyoil, sincethe government fixed base import prices of palm oil in August to preventunderinvoicing.India was Malaysia's main palm oil buyer in 2000, taking 2.03 milliontonnes and also a major buyer of Indonesian palm oil.India was seen buying 400,000 tonnes of palm oil in April, May and Juneeach, but the amount could fall to 200,000 tonnes in September or evenlower, they said.In August, India fixed the base import price of crude palm olein at $357 atonne. It means any importer will have to pay duty assessed on an importprice of $357 a tonne for the oil no matter what its purchase price.India had earlier fixed the base import price of crude palm oil at$337/tonne and RBD palm olein at $372 a tonne.Some traders speculated buyers in India shunned palm oil because of therecent rise in Malaysia's crude palm oil futures, which hit a 22-monthhigh at 1,315 ringgit ($346.05) (third-month basis) in August."Everybody knows that India's demand is going down, but nobody dares tosay how much it will be. I don't think Diwali will rescue us," said thesecond freight broker, referring to the Hindu festival of lights inNovember which normally boosts palm oil imports.Brokers said another big buyer, Pakistan, had bought plenty of palm oil inJuly/August and is unlikely to return to the market in September.They said freight rates from Peninsular Malaysia/Sumatra were flat at$23-$24 to Pakistan and at $46-$47 to Rotterdam. Freight rates stood at$25 for north China, $24 for central and at $20 for the southern part ofthe country.
