MARKET DEVELOPMENT
22-08-2005
Palm oil to maintain edge over soft oils in Asia
19/08/2005 NEW DELHI, (Reuters) - Soy oil suppliers are making an all outeffort to snatch a part of palm oil's market share in Asia but India'sproximity to palm oil suppliers and China's preference for soybeans willstand in the way.Traders and analysts said for India, the world's largest edible oilsimporter, a shorter distance to palm oil suppliers of Malaysia andIndonesia, compared with soft oil exporters in South America and theUnited States, in addition to lower prices, will more than offset arelatively lower import duty on soft oils.And in China, the preference to increasingly import soybeans to feed itshuge crushing capacity is helping the world's second- largest importer ofvegetable oils to generate enough soy oil of its own, leaving little scopefor importing soft oils.In India, palm oil has a 70-75 per cent share out of nearly five milliontonnes of annual edible oil imports, leaving the remaining 25-30 per centto soft oil.The ratio of soy oil in the import basket in India has been growingbecause of lower duties on it, leaving Asian palm oil producers a worriedlot. But Indian traders say palm oil producers' fears of soy oil capturingthe market were unfounded."Palm oil will continue to be the king, irrespective of the prices orcustoms duties," said B.V. Mehta, executive director of the SolventExtractors' Association of India.Traders say palm oil is 10-15 per cent cheaper than soy oil, well acceptedby the Indian consumer as a cooking medium and is also preferred byindustrial users. The landed cost of crude palm olein is around $430 atonne at Indian ports.In China, soy oil imports in the first seven months of 2005 fell by 41.5per cent to 940,000 tonnes over the same year-ago period, while palm oilimports during the same period rose 30 per cent to 1.6 million tonnes.A boom in soy crushing in China has been pushing down prices ofdomestically produced soy oil, making imports unattractive.And importers in China, like in India, also turn to buy palm oil in smallcargoes to meet immediate needs."This year was pretty good for palm oil because international soybeanprices were pretty expensive," said a market analyst with a Chinesecrusher. "But soy reserves are relatively high and are pressuring soy oilprices, especially because crushers have to keep their plants going forcash flow.""The ratio between the two oils can undergo a change in India depending onfreight rates and other factors like shipping time but soy can neverovertake palm oil," said Mehta.
