Jul 22 2022
Indonesia's exports of palm oil are expected to be around 1.8 million mt in June and between 2.2 million mt-2.8 million mt in July, market sources told S&P Global Commodity Insights July 22, as demand from buyers stagnated despite lower prices.
Nearly two months since Jakarta revoked a complete ban on palm oil exports, the world's largest palm oil producer and exporter continues to struggle with overflowing storage tanks and low farmgate prices as international markets price in higher stocks and low demand.
"Key players still vary about how much downside is left in the prices knowing the huge stockpiles available in Indonesia. Due to this, I expect Indonesia's exports to be limited to 1.9 million mt in June and 2.2 million mt in July," Aditya Jeripotula head of research at commodities firm TransGraph Ltd said.
Indonesia typically exports between 2.5 million and 2.8 million mt of palm oil in a month.
In 2021 it produced 46.9 million mt and exported 34.2 million mt of palm oil products including biodiesel, according to Indonesian Palm Oil Association or Gapki data.
However, stocks in the country rose to a record high of 7.23 million mt at end-May, according to the latest Gapki data, after a three-week ban on exports was announced by President Joko Widodo on April 23 to check rising food inflation and cooking oil shortages.
Market sources estimate that Indonesia's palm oil stocks could be much higher than that figure, at closer to 10 million mt.
June exports should be around 1.85 million mt and July exports should be around 2.8 million mt as prices have corrected a lot and margins are good. Anil Kumar Bagani, research head at Sunvin Group, a Mumbai-based vegetable oil brokerage said.
In Indonesia, factories are running out of space to store the oil and some palm oil makers are using floating tanks or barges near ports, a Medan, Indonesia-based palm oil analyst told S&P Global. The analyst expects July shipments to reach 2.1 million mt.
"The elephant in the room is the rising stockpiles in Indonesia. We are expecting a rather large inflow of cargoes from Indonesia, Lingam Supramaniam, director with vegetable oil brokerage Pelindung Bestari at Port Klang, Malaysia said, adding that about 120,000 mt of Indonesian palm oil will make its way to Malaysia in July and August.
In Malaysia, the second largest palm oil producer after Indonesia, crude palm oil futures have nose-dived almost 40% from their April record highs.
The third month crude palm oil contract on the Bursa Malaysia Derivatives exchange slid to MR3,720/mt ($835.58) at market close on July 22, down 17.3% since the start of the month.
The huge inventory buildup in Indonesia which may touch to 8.5 million mt by end-July and 2 million mt in Malaysia are a big concern for the futures market and pull it below to MR 3000/mt, Abdul Hameed, head of Manzoor Trading Company, a vegetable oil company based in Pakistan said.