Malaysian palm oil futures closed slightly lower on Thursday, having hit their weakest level in two weeks after top edible oil importer India raised the tax on refined palm oil from Malaysia to 50 per cent from 45 per cent for six months.
The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange was down 0.2 per cent at 2,182 ringgit per tonne at the close of trade. It earlier fell as much as 1.1 per cent to 2,163 ringgit, its lowest since August 21.
Palm oil may test support at 2,161 ringgit per tonne, a break below which could cause a fall to 2,114 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
“Palm prices fell after overnight news of India increasing the refined oil import duty by 5 per cent,” said a Kuala Lumpur-based trader. “This will see the need for Malaysian crude palm oil to compete with Indonesia’s lower prices in order to be competitive.”
India late on Wednesday raised the import tax on refined palm oil from Malaysia to 50 per cent from 45 per cent for six months to curb imports and boost local refining.
The world’s biggest edible oil importer currently imposes a 40 per cent import tax on crude palm oil and 50 per cent on refined palm oil. But since January, refined palm oil shipments from Malaysia to India have been taxed at 45 per cent under an agreement.
Industry players expect the tax hike on refined palm oil to cause Indian buyers to switch to importing crude palm oil.
According to industry players on Thursday, India’s demand for Malaysian refined palm oil is likely to drop sharply in October following the tax hike, curtailing further exports from the Southeast Asian country and leading to higher inventories.
Indonesia traditionally claimed two-thirds of India’s palm oil imports, but in the first half of 2019 Malaysia surpassed Indonesia as the biggest supplier to India due to the duty advantage.
In related oils, US soyoil futures on the Chicago Board of Trade were down 0.1 per cent, and the September soyoil contract on the Dalian exchange fell 0.2 per cent. The Dalian September palm oil contract fell 2.3 per cent.
Palm oil prices are affected by movements in related oils, as they compete for a share in the global vegetable oils market.