03/08/2009 (Khaleej Times), Dubai — High costs to re-export the commodity have moved traders to rethink a strategy to develop the UAE into a trading hub for Malaysian palm oil. The UAE’s palm oil imports from Malaysia fell nearly 50 per cent between January to June due to rising shipping costs to re-export the commodity from the Gulf Arab state, traders? said on Sunday.

The UAE has looked to position itself as a trading and re-export hub for commodities like cotton, gold and palm oil. Previously, traders would ship their cargo into the UAE where it would be stored and packaged in warehouses before being shipped back out to their final destination.

But higher shipping costs have changed that. “The UAE is no longer regarded as a strategic hub for palm oil traders because all over the world freight rates have gone down but the rates here (UAE) are still the same,” said Sudhakar Tomar, managing director of Hakan Agro DMCC a leading food commodities trading firm in the Gulf.

The UAE’s palm oil imports from Malaysia hit 108,364 tonnes in the first half of 2009, versus 203,341 tonnes during the same period last year, data from the Malaysian Palm Oil Council showed. Global production of palm oil in the first six months of 2009 was 7,919,807 tonnes, marginally lower when compared to the same period last year when production was 8,202,247.

“Production (globally) has been more or less the same, it’s just that freight rates in Asia have gone down so shipping the oil from the source destination to the final destination is much cheaper,” said Tomar. Falling palm oil prices has also deterred traders from shipping the commodity to Dubai first before re-packaging it for re-export to other countries.

“Since prices have gone down and we are making less profit anyway, it doesn’t make sense to re-export the oil from Dubai to India for example if it will cost us 30 percent more in freight,” said a palm oil trader based in Malaysia. “The UAE as a trade hub does not make any commercial sense for us anymore,” he added. 

Palm oil prices like those of most other commodities have been hit by the global financial crisis, falling by almost 50 percent from a high of $1,049 per tonne in March 2008 to a low of $522.7 in January this year. -Reuters-