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Indian refiners canceled purchases of 100,000 metric tonnes of palm oil for delivery between October and December, as New Delhi's move to raise import duties prompted them to book profits amid a rally in overseas prices, five trade officials told media.
After Malaysian palm oil futures jumped to their highest level in 2-1/2 months, refiners at the world's biggest palm oil importer shed 50,000 tonnes last Monday (Sept 23, 2024), the amount in the past four days.
The Indian cancellations could limit the rally in Malaysian palm oil prices, although they could support soyoil prices as some refiners shift to soyoil.
Earlier this month, India raised the basic import tax on crude and refined edible oils by 20 percentage points, effectively increasing the total import duty on crude palm oil to 27.5% from 5.5%.
"The hefty duty hike and the jump in Malaysian prices caught everyone off guard," said an Indian buyer who operates a refinery on the east coast and canceled palm oil shipments for October delivery.
"It created a situation where refiners can make more money by canceling old purchases instead of refining and selling. Sellers are happy too, since they can now sell at higher prices to new buyers."
India, on average, imports 750,000 tons of palm oil every month, and the cancellation of 100,000 tons represents about 13.3% of monthly imports.
Crude palm oil (CPO) is currently being offered at about $1,080 a ton, including cost, insurance, and freight (CIF), in India for October delivery, compared to around $980 to $1,000 a month ago, giving a profit margin of $80 to $100 to buyers.
East Coast-based refiners are washing out on contracts by canceling them and making a decent profit, said Aashish Acharya, vice president at Patanjali Foods Ltd (PAFO.NS), opening a new tab, a leading importer of edible oils.
India imports palm oil mainly from Indonesia, Malaysia, and Thailand.
"Refiners aren't sure about the demand for the December quarter with these higher prices. They're also worried about whether the prices will hold. That's why they're canceling contracts," said Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil brokerage and consultancy firm.
Source: Online/GFMM
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