A push by palm oil producers to cultivate new markets in Southeast Asia and the Middle East is unlikely to move the dial on exports this year, traders and analysts say, as customers favour cheaper rival oils while holding out for palm price cuts.
The impetus for Indonesia and Malaysia, the number 1 and 2 palm oil suppliers respectively, to seek out new buyers comes from the European Union's move to curb palm oil use in biofuels as part of broader climate change goals. The EU is the second largest buyer of the top two producers' palm oil.
"Demand in the Middle East won't pick up unless the economy is really growing, or we see big names invest in refineries there. This region is not a major demand driver," said William Simadiputra, an analyst at DBS Vickers.
"Demand during Ramadan usually picks up but for a full-year basis we don't expect much change (from last year)," he said. Demand rises during Ramadan, known for its communal feasting, when the oil is used to prepare meals to break day-long fasts.
Egypt, one of the key Middle East consumers, is seen importing 1.25 million tonnes of palm oil in 2017/18, down from 1.32 million tonnes the previous year, according to U.S. Department of Agriculture data.
Data from the Iranian Vegetable Oil Industry Association showed the country's palm oil imports ranged between 300,000-400,000 tonnes from 2013 to 2015.
"Palm oil usage will stagnate at 400,000-420,000 tonnes a year," said Saeid Vaygani, an association representative. "Soyoil is widely used in Iran."
Traders say buyers are holding off purchases in hopes of prices falling to the 2,300-2,400 ringgit a tonne range. Palm oil production this year is widely expected to rise this year, recovering after being hit by the El Nino weather pattern and likely bringing lower prices.
Benchmark prices was trading around 2,489 ringgit($636.08) on Friday afternoon.
In Southeast Asia, industry players don't see significant uptakes of palm oil without government policy action to promote it, or a reduction in other edible oil supplies.
The Philippines, one of the region's most populated countries, relies on coconut oil, and while Myanmar is seeing some pick-up in palm oil demand the gains are not significant, said David Ng, a derivatives specialist at Phillip Futures.
"This is not a major market for palm. It needs promotional effort before we see contributions from these countries getting higher."
Source:-Blackseagrain.net
