Malaysian palm oil stocks staged their fastest annual rise in at least nine years, as exports slowed faster than investors had expected, undermined by a hike by India to taxes on vegetable oils.
Palm oil inventories in Malaysia grew by more than 350,000 tonnes over the month of November to 2.56m tonnes, the Malaysian Palm Oil Board said.
That represented the highest figure since the end of 2015, and took stocks 54% higher year on year – by far the quickest pace of annual growth on data going back to 2009.
The inventory rise was indeed far quicker than had been expected by investors, who had forecast a 2.44m-tonne figure, according to a Reuters poll.
The stocks increase came despite a slowdown in production, which tends to fall late in the calendar year, before beginning to rise again around March-April.
Output, at 1.94m tonnes, while up strongly on the drought-affected level of a year before, was down by 3.3% month on month to a level in line with market expectations.
However, exports, at a seven-month low of 1.35m tonnes, fell far short of investor expectations of a 1.46m-tonne figure, and stood 11.9% lower month on month, in a decline attributed to weaker demand from India, the top vegetable oils importer.
“The decline was due to low Indian imports, after it raised import taxes,” Alan Lim at Kuala Lumpur-based broker MIDF told Agrimoney.com.
India duty hike
India on November 17 revealed that it had doubled the import duty on crude palm oil to 30%, while raising that on refined palm oil by 15 points to 40%, and with increase to levies on buy-ins of the likes of soyoil and rapeseed oil too.
Malaysia’s palm oil exports had, as of November 15, been running lower month on month by a more modest pace of 4.3%, according to cargo surveyor ITS.
And shipments have begun December on a weak note too, falling by 16.6% month on month in the first 10 days, ITS data show.
However, Mr Lim was sanguine on prospects for a revival in Indian imports, foreseeing that the slowdown in volumes would prove only “temporary”, and pick up again early in 2018 as stocks run low.
“India is a net importer of vegetable oils, its consumption is 2.5 times that of production,” making buy-ins a necessity.
And, in Kuala Lumpur, palm oil futures rose despite the soaring stocks, closing 0.6% higher at 2,473 ringgit a tonne - and recording their first winning session of the month.
“Since prices were already quite low, investors started buying again,” Mr Lim said.
Palm oil futures on Monday touched 2,455 ringgit a tonne, their weakest in five months, and down 15% from a high set in September.