Palm oil imports to hit 5-year low amid price shifts, rising output

A recovery in palm oil production and lower imports by price-sensitive consumers are expected to drive prices lower, chipping away the premium of the tropical oil over rivals, even as top producer Indonesia boosts biodiesel production. 

Benchmark palm oil futures, which jumped 20 per cent in 2024 to a two-year high, have already lost market share as top importers like India shift to cheaper alternatives such as soybean and sunflower oils. 

Palm oil has been trading at an unusual premium over other oils in recent months due to supply disruptions from top producers Indonesia and Malaysia, caused by floods. 

But palm oil inventories could start rising in the coming months as demand drops, industry officials and analysts said at a conference in Kuala Lumpur this week. 

"I expect that stocks will continue to rise if demand is not picking up at these prices," said Thomas Mielke, executive director of Hamburg-based forecaster Oil World. 

Demand destruction & higher output 

Elevated palm oil prices have been prompting buyers to switch to soybean oil and this could lead to stock build-up once production starts picking up, Mielke said. 

India's palm oil imports in the 2024/25 marketing year ending in October 2025 could fall to 7.5 million metric tonnes, the lowest in five years, said Sanjeev Asthana, president of the Solvent Extractors' Association of India (SEA). 

"The downward production in Indonesia is over; the period of recovery has already begun. After Ramadan I expect a significant pickup in production," analyst Dorab Mistry said. 

The production recovery and lower demand could bring down prices and palm oil will likely trade between 3,600 ringgit and 4,100 ringgit ($814.5 and $927.6) per metric ton from April to November, Mistry said. 

Palm oil's premium over soy oil is already narrowing. It was offered at a premium of $50 per metric ton in India this week, as compared with more than $100 a month ago. 

Indonesia's crude palm oil production is likely to rise to 50 million metric tons in 2025 from 48.16 million metric tons a year ago, while Malaysia's output is likely to rise marginally to 19.5 million metric tons, analysts said. 

Despite higher production, Indonesia's 2025 palm oil exports are likely to drop 7.3 per cent from a year ago to 27.35 million metric tons as Jakarta boosts biodiesel output, said Fadhil Hasan at the Indonesian Palm Oil Association. 

Indonesia expects its B40 biodiesel programme, aimed at reducing its reliance on imported diesel fuel, will reach full implementation next month after delays at the start of the year. 

Indonesia's 2025 palm oil use for biodiesel is likely to climb 13.6 million metric tons, up from 11.44 million tons a year ago, Fadhil said. 

"Rising biodiesel mandate is reducing surplus for the exports and this trend will continue," he said.   

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)