03 October 2001 (Business Times) - PALM oil bulkers may face a criticalshortage in storage capacity if exports remain slow in the coming monthswhile production stays high, industry sources say.Malaysian crude palm oil (CPO) exports for September is estimated to havedropped by between 25 per cent and 30 per cent to about 620,000 tonnesfrom 879,717 tonnes in August.The Malaysian Palm Oil Board (MPOB) is expected to announce the officialexport, production and stockpile figures for the month on October 12.CPO stock stood at 878,316 tonnes in August and analysts and traders saidit may rise a whopping 48 per cent to over 1.3 million tonnes.The fall in exports has been attributed mainly to disruptions indeliveries to Pakistan caused by shipping lines’ reluctance to ply theroute, as well as higher freight rates and a newly imposed war-risksurcharge.Freight rates from Malaysia to Pakistan were raised US$1 to between US$23(US$1 = RM3.80) and US$24 per tonne last week.Shipowners are also believed to be imposing a war-risk insurance surchargeof up to US$10 per tonne.“CPO stock has been steadily rising. If the export situation does notimprove soon, bearing in mind of the continued high production levels, wewill be faced with a critical stock level,” said a CPO bulker executivewho spoke on condition of anonymity.Another industry executive was however more optimistic, saying thatprovided there is no all-out war in West Asia trade should stabilise quitesoon.“There has been some negative impact on the palm oil sector, but mainlybecause some shipments to Pakistan have been put on hold.“Pakistan is not self-sufficient in edible oil, they will still have toimport CPO from countries like Malaysia,” he said.In fact, traders said Pakistan have made fresh inquiries to buy palm oilfrom Malaysia and Indonesia, despite the higher freight cost, on concernsover possible military attacks by US against neighbouring Afghanistan.Demand for palm oil is also expected to receive a boost from Indianconsumers ahead of Deepavali in November.India is the largest importer of Malaysian CPO, buying some 2.03 milliontonnes last year and 2.38 million tonnes in 1999.Consensus forecast by traders and analysts put production of CPO at anall-time high of over 11 million tonnes for 2001, compared to a projected10.8 million tonnes earlier.The clouded outlook for the palm oil market is also reflected in thenarrower margins faced by trading companies.Manager Zaharin Hamzah told Business Times that his company, for one, hasstopped trading in CPO futures temporarily on account of the weak pricesand fluctuating demand.“We are now only trading spot.”On the Malaysian Derivatives Exchange yesterday, palm oil spot October andDecember futures eased RM28 each to RM862 and RM872, respectively.Traders said the fall was also attributable to possible dumping byIndonesian suppliers amid weakness in the rupiah.On the Kuala Lumpur Stock Exchange (KLSE), the plantation index eased 4.31points to 1,419.78. KL-Kepong Bhd lost 10 sen to RM5.10 and Chin TeckPlantation Bhd 12 sen to RM4.06.This was despite better overall trading sentiments which saw the benchmarkKLSE Composite Index closing 2.74 points higher at 616.74.Pakistan has consistently bought about one million tonnes or 9 per cent ofMalaysia’s palm oil exports annually.Malaysia is the world’s largest producer of the commodity. The ninemillion tonnes it exported last year raked in about US$4.2 billion