Manufacturers of cooking oil have secured an alternative shipment of palm oil— the key raw material used in processing— calming fears of an imminent shortage at a time when producers are running out of stocks

27/05/2011 (Business Daily) - Manufacturers of cooking oil have secured an alternative shipment of palm oil— the key raw material used in processing— calming fears of an imminent shortage at a time when producers are running out of stocks.

The manufacturers suffered a disruption in supply of the raw material last month after the Mombasa bound ship carrying 28,000 tonnes of palm oil imports from Indonesia was hijacked by Somali pirates off the Kenyan coast.

MV Gemini, a Singapore-registered ship, is still being held captive since the April 30 incident.

The new consignment is expected to arrive in the country in two weeks. “Things are getting tight, but we have already secured an alternative ship through our supplier whose arrival is expected in less than two weeks,” said Vimal Shah, the chief executive of Bidco East Africa, a manufacturer of edible oil, cooking fat, soap and related products.

The manufacturers said their supplier in Singapore had succeeded in securing an alternative ship that will bring in stocks early next month. Most shipping lines had turned down Indian Ocean transport contracts on fears of increased piracy attacks off the coast of Somali.

Pwani Oil, and Kapa Oil refineries said their stocks had already dried up suggesting the possibility of a shortage as Bidco East Africa said stocks were diminishing.

Nakumatt Supermarkets, the country’s largest retail store, said the suppliers who still have stocks are rationing their sales. “They are selling in smaller rations to ensure consistent supplies,” said Atul Shah, the managing director of Nakumatt Supermarkets.

Pwani Oil Refineries said their stocks ran out last week on Saturday and said they will only be able to resume manufacturing on June 7th this year as they do not have any palm oil stocks.

Officials at the Kenya Maritime Authority, however, said the ship that had been hijacked is yet to be released raising the possibility of the stock worth over Sh3 billion going bad due to changes in its chemical structure.

“MV Gemini is still pirated and currently anchored at Grisby Somalia, no information about her is available so far,” said Nancy Karigithu, director general Kenya Maritime Authority.

It was not immediately clear if stocks already in the supply chain could steer the country in the coming two weeks. Chain stores like Tuskys and Nakumatt Supermarket said they are still operating on their old stock which is yet to run out.

“We still have enough stocks in our stores to last us until the next supplies arrive,” said Frank Kamau, the general manager Tuskys Supermarkets.

Palm oil prices started declining this month after a month-to-month rally that peaked in February as bad weather disrupted harvesting in Malaysia.

Increased supplies on improving weather conditions in key areas of Malaysia and Indonesia are expected to reduce the price of palm oil by as much as 30 per cent starting July this year. High crude oil prices had also seen increased conversion of palm oil into biofuel piling pressure on the prices of the commodity.

As a result, local prices of cooking oil and related products had increased by a record 30 per cent in the last five months.

Prices for the August delivery contract dropped to $1,094 this week from $1,248 last month.

The regional market is served by manufacturers who procure their supplies together to save on transport costs.

Palm oil is used to manufacture household products such as cooking oil, cooking fat, soap and cosmetics.

Cooking fat and cooking oil form a basic part of the every day meal whose shortage is likely to affect the cost of food piling more pressure on the cost of living.

The first quarter of the year witnessed the highest incidents of piracy globally, the sharp rise was driven by a surge in piracy off the coast of Somalia, where 97 attacks of the total 142 global incidents were recorded in the first quarter of 2011, up from 35 in the same period last year.