By Charles F. Moreira, Editor
Crude Palm Oil (CPO) prices listed by the Malaysian Palm Oil Board (MPOB) perked up to RM2,432.00 per tonne on 4 March 2020, after having trended steadily downwards to low of RM2,377.50 the day before.
Also, prices per tonne of oil palm fresh fruit bunches (FFB) which had been trending downwards until 4 March 2020, perked up by between RM7 and RM8 per tonne for grades A, B and C across Malaysia’s six oil palm growing regions.
This sudden upwards reversal of CPO and FFB prices follow news on 2 March 2020 that the India’s Directorate General of Trade Remedies (DGTR), the investigative arm of the Commerce Ministry, had issued a notice recommending no further extension of the bilateral safeguard duty on imports of refined palm oil from Malaysia beyond its 180 days period.
Following a complaint by an industry body, the Solvent Extractors’ Association of India (SEA), that there was a jump in imports of ‘refined bleached deodorised palmolein and refined bleached deodorised palm oil’ from Malaysia, the DGTR initiated an investigation into their allegation in August 2019 and its preliminary findings suggested an imposition of this safeguard duty for 180 days.
On 4 September 2019, the Revenue Department followed up by raising the import duty on refined palm oil from Malaysia from 45% to 50% for a six month period to protect the interests of India’s domestic players.
However, following the DGTR’s final findings, it concluded that “it may not be necessary to impose the bilateral safeguard duty beyond the current period of 180 days”.
The DGTR’s investigations were conducted under the India-Malaysia Comprehensive Economic Cooperation Agreement (Bilateral Safeguard Measures) Rules, 2017, a bilateral trade agreement between India and Malaysia on reduced customs duties on several goods traded between both countries.
However, we had earlier cited a Reuters Africa report of 8 January 2020 which said that India’s Ministry of Commerce and Industry had restricted the import of refined palm oil, meaning that importers of refined palm oil would still need to apply for import licences and not just pay higher import duties.
Also, will India palm oil importers continue to voluntarily import palm oil from other countries such as Indonesia, rather than from Malaysia for political reasons – i.e. an industry rather than a governmental action?
Thus this raises questions as to whether a 5% reduction in import duty on Malaysian refined palm oil will make much difference in the longer term and whether this uptick in CPO and FFB prices will be sustainable or is just a knee-jerk dead cat bounce in the palm oil market.