23/09/2011 (Bloomberg) - Pakistan, the world’s third-largest buyer of palm oil, may boost purchases from Indonesia next year after it agreed to slash a tax on imports under a free-trade treaty, reducing dependence on Malaysia.

Purchases from Indonesia, the biggest producer, may increase to as much as 30 percent of Pakistan’s annual imports of about 1.9 million metric tons from an estimated 5 percent this year, Abdul Rasheed Janmohammad, vice chairman of the Pakistan Edible Oil Refiners Association, said in an interview.

The free-trade agreement with Indonesia, effective from Jan. 1, will help Pakistan lower its reliance on Malaysia for supplying its cooking oil needs. Under the treaty, the South Asian nation will reduce by 15 percent the duty it levies on palm oil, Commerce Secretary Zafar Mahmood said on Sept. 17.

“Pakistan’s industry will benefit because of the different options,” Janmohammad said on Sept. 20. “We will have two regions to deal with and competition will become tough.”

Pakistan meets about 80 percent of its needs through imports mainly from Malaysia, with which it signed a similar agreement three years earlier, Janmohammad said.

Importers from Pakistan may continue to make bulk of their purchases from Malaysia as it has better port facilities, Janmohammad said. Crude palm oil imports this year may increase as much as 30 percent from 492,000 tons last year, he said. Purchases totaled 442,000 tons in the eight months through Aug. 31, he said.

“We will be importing more of crude this year,” Janmohammad said. “It’s a lot cheaper than refined.”

Prices Decline
Palm oil futures in Malaysia have declined 20 percent this year on speculation global production may expand. The December- delivery contract on the Malaysia Derivatives Exchange slumped as much as 2 percent to 3,006 ringgit ($951) a ton, the most since Aug. 9, in Kuala Lumpur today.

Pakistan imported 1.25 million tons of edible oils in the eight months ended Aug. 31, compared with 1.175 million tons a year earlier, according to the refiners’ association. The country bought 1.93 million tons of palm oil in 2010.

Rapeseed imports may total 776,000 tons in the year ending Dec. 31, more than the 700,000 tons forecast in July, Janmohammad said. The nation bought 1.16 million tons of the oilseed in 2010.

Damage to cotton crop from flooding in the nation’s Sindh province may reduce cotton-seed oil supplies by about 100,000 tons, Janmohammad said.

Flooding in Sindh in Pakistan, the fourth-biggest cotton grower, damaged an estimated 3 million bales of fiber, Agha Jan Akhtar, agriculture secretary for Sindh, said on Sept. 14