Palm Oil Import Demand Seen Slipping by Oil World on Price Gains

Palm oil imports will probably record a “sizable decline” this quarter from a year earlier as rising prices make the vegetable oil less attractive compared with other seed oils, industry researcher Oil World said.

“Eroding price competitiveness of palm oil has already started to affect trade and consumption volumes,” Hamburg-based Oil World wrote in an e-mailed report. “Price strength of palm oil will promote a shift in demand to other oils and fats.”

Palm oil futures have gained 1.1 percent this month after jumping 12 percent in October as rainfall in Southeast Asia delayed harvesting. That adds to relatively low stocks in Indonesia and Malaysia, Oil World said today.

Record oilseed harvests will weigh on prices for seed oil and meal in 2013-14, according to Oil World. The gain for palm oil means its discount compared to other plant oils has shrunk to the smallest in “a long time,” the researcher said.

Palm oil accounted for a record 22 percent of the European Union’s oil and fat consumption in 2012-13, from 16 percent to 19 percent in the previous 10 years, according to Oil World.

“Additional market share was garnered primarily in the energy sector,” Oil World wrote. “Deteriorated price competitiveness vis-a-vis crude mineral oil as well as large EU supplies of sunflower oil will probably reduce palm oil’s market share in the EU pronouncedly this season.”

Using palm oil to produce heat and electricity has “probably” become unprofitable in the EU, meaning a “huge portion” of demand created in 2012-13 will fall away at current pricing, based on the report.

Palm oil imports by China, India and Pakistan fell 14 percent to a combined 3.91 million metric tons in the August-October period from 4.52 million tons a year earlier, according to Oil World.

“Palm oil expanded its market share in many countries in 2012-13 owing to its unprecedented price competitiveness,” Oil World wrote. “Import demand for palm oil clearly suffered a setback in recent months, in line with the deteriorating price competitiveness.”

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