Palm oil demand strong as top buyers China, India restock inventories

KUALA LUMPUR (Reuters) - Palm oil demand is expected to remain robust for the rest of the month as key consumer countries India and China rebuild low stock levels, bucking a seasonal trend in which shipments of the tropical oil typically taper off at year-end.

A narrow discount to a rival edible oil, however, could limit demand growth moving forward, say traders and analysts, since buyers usually switch to more favored soyoil when its price premium over palm narrows.The price differential or the spread between palm oil on the Bursa Malaysia Derivatives Exchange and Chicago Board of Trade soyoil has been hovering between $80 and $90 a tonne, soyoil’s narrowest premium over palm since February.

“For October we’re looking at a 10 to 13 percent gain in exports, mainly from China and India, though India demand may slow compared to the previous month,” said David Ng, a derivatives specialist at Phillip Futures in Kuala Lumpur.

“The current spread could be a limiting factor for demand (for palm oil), but major destinations are lacking palm this year, so they are restocking their inventories,” Ng said.India, in particular, has been seeing shortages in its domestic vegetable oils supplies, he said.

India and China are the world’s top two buyers of palm oil, and command a substantial share of global demand. Palm oil import demand from China and India, which celebrate the Mid-Autumn and Diwali festivals respectively this month, had already gained in September as buyers stocked up ahead of the events.

Malaysian shipments overall rose in September over August with notable gains in Chinese demand, according to data from the Malaysian Palm Oil Board.

Also, the most recent export data from the Indonesian Palm Oil Association showed a 24 percent monthly gain, with shipments to China and India rising.Port stocks in China in October are at half of their peak levels this year, despite having risen from a yearly low in August.

“Consumer countries had been waiting for prices to decline in the second half of 2017, but prices held steady and did not fall significantly,” said Alan Lim, plantations analyst at MIDF Research.

Lim expects palm’s spread or discount against soyoil to range between $80-100 per tonne until year-end, but “whether the discount can maintain will depend on the weather in Brazil”.

Soybean production in Brazil, the world’s second-largest producer, is likely to be smaller in the 2017/18 season compared to the prior crop year due to less favourable weather.“If soybean output declines and soyoil prices go up, we expect that palm oil demand will increase,” Lim said.

Palm Oil exports imports

China import growth pushes trade surplus to 6-month low

China’s export growth came in lower than forecast in September as an unexpected jump in the value of imports resulted in the country’s smallest trade surplus in half a year. But the latest data also showed the largest nominal trade surplus with the US on record, based on figures dating back to 1993.

The dollar value of outbound shipments rose 8.1 percent year on year in September to $198.3bn, according to the General Administration of Customs, up from a rise of 5.5 percent in August but missing a median forecast of 8.8 percent from economists surveyed by Reuters.

Imports climbed more than expected, however, rising 18.7 percent from a year prior to $169.8bn and outperforming a median forecast predicting growth in inbound shipments would edge up just 0.2 percentage points from August’s pace of 13.3 percent.

Growth in commodities imports remained robust in volume terms, with shipments of iron ore rising 10.6 percent year on year to a record 102.8m tonnes. The uptick in shipments comes despite recent falls in the commodity’s price as authorities demand steel mills curb output to reduce pollution during the winter heating season.

Analysts at ANZ suggested the rise was due to demand from Chinese steel mills for higher-grade iron ore. Looking at the broader picture for trade, they said a “lack of build in stockpiles suggests strong underlying demand, rather than restocking, was the main driver” behind the latest figures.

The jump in import value resulted in China’s trade surplus dipping to $28.5bn, down $13.5bn from August to the lowest level since March and counter to expectations it would fall just $2.5bn.

However China’s trade surplus with the US climbed to $28.5bn in September, up almost $2bn from August and marking the largest on record not adjusted for inflation, according to data from CEIC sourced to China’s customs administration and reaching back to January 1993.

Pharma exports declined by 4% up to August on pricing pressure

Pharma exports from India registered a negative growth of 4 percent during the first five months of the current fiscal owing to increased regulatory issues coupled with pricing pressure in global markets, a Pharmexcil official said on Monday.

According to Udaya Bhaskar, the Director General of the Pharmaceuticals Export Promotion Council of India (Pharmexcil), a Ministry of Commerce and Industry body, the pharma exports to other countries witnessed a decline of 7.9 percent during the April-July period while recovered to 4 percent in August leaving the overall growth at minus four percent till August this year.

"Till July, pharma exports registered minus 7.9 percent growth. Subsequently it recovered in August and stood at minus four percent. There was four percent growth in August. Pricing pressure is one of the factors (for decline in exports). To some extent import alerts (by US FDA on Indian plants), regulatory issues and currency fluctuation, are some of the factors contributed to downward growth," Udaya Bhaskar told PTI.

He, however, hoped that the overall exports will recover and come into positive zone for the full year as exports are expected to take an uptick from September.
"We expect the overall growth for the year would be in the positive. Implementation of GST also created initially some confusion among the manufacturers leading to stoppage of production by some companies. Now we are seeing some growth," he further said.

According to statistics, India exported USD 16.90 billion worth of pharma products during 2015-16 and the same was slightly declined in 2016-17 to USD 16.64 billion in 2016-17.

Pharma exports from India

Germany's January-August oil import bill up 28 pct

FRANKFURT, Oct 9 (Reuters) - Germany spent 20.6 billion euros ($24.18 billion) on crude oil imports in the first eight months of the year, up 28.0 percent on the year due to higher prices, while volumes fell 1.3 percent, the BAFA foreign trade office's data showed. Russia remained the top supplier with 37.2 percent of the total, down from 39.1 percent a year earlier. The European Commission has called on EU member states to diversify away from Russian energy supply. UK and Norwegian supplies accounted for 20.7 percent of the total and 23.5 percent came from OPEC members, BAFA said in a statement. Germany imported oil from 28 named countries in the eight months while small volumes came from five unspecified sources. Jan-Aug 2017 Jan-Aug 2016 Pct change yr/yr Import bill 20.6 16.1 + 28.0 (bln euros) Import volume 59.4 60.2 - 1.3 (mln tonnes) Average border 346.96 267.80 + 29.6 price (euros/tonne) Data on specific crude oil import origins.

Petroleum products top list as India’s exports grow for 12th consecutive month in August

India’s exports have been rising for the past one year, registering a steady growth for the twelfth consecutive month in August, official data showed on Friday. India’s exports grew to $23.81 billion in August this year, up from $22.5 billion recorded in July this year and $21.59 billion during August 2016.
The exports recorded in August corresponds to an increase of 10.29 percent to $23.81 billion from $21.59 billion reported for the corresponding month of last year, data released by the Ministry of Commerce and Industry has shown.
“In continuation with the positive growth exhibited by exports for the last twelve months, exports during August, 2017 have shown growth of 10.29 percent in dollar terms valued at $23,818.83 million as compared to $21,597.09 million during August, 2016,” the ministry said in a statement.
During August, 2017, major commodity groups of export showing positive growth over the corresponding month of last year are engineering goods (19.53 percent), petroleum products (36.56 percent), organic and inorganic chemicals (32.41 percent), drugs and pharmaceuticals (4.21 percent), and RMG of all textiles (0.56 percent).
However, the country’s imports during the month under review also increased by 21.02 per cent to $35.46 billion from $29.30 billion.“Major commodity group of imports showing high growth in August, 2017 over the corresponding month of last year are petroleum, crude and products (14.22), electronic goods (27.44), machinery, electrical and non-electrical (18.35), gold (68.90) and pearls, precious and semi-precious stones (30.88),” the statement said.
Segment-wise, the data showed that India’s oil imports during August increased by 14.22 percent to $7.75 billion, from $6.78 billion in the same month last year.
“The global Brent prices ($/bbl) have increased by 11.34 percent in August, 2017 vis-à-vis August, 2016 as per World Bank commodity price data,” the statement added.
The non-oil imports during August, 2017 were estimated at $27.70 billion which was 23.07 percent higher from $22.51 billion shipped in during the corresponding month of 2016.

India likely to double import duty of Wheat

The government is likely to increase import duty on Wheat to 20-25 percent from 10% to curb cheap shipments and give positive price signal to farmers who will start sowing winter crop after the Diwali festival, an official source said.

In March, the government had imposed 10% import duty on Wheat to contain sharp fall in local prices in view of the bumper crop of 98.38 million tonnes in 2016-17 crop year (July-June).

The trade data showed that private traders imported about 8.5 lakh tonnes of Wheat since April at 10% import duty. Another 1.5 lakh tonnes of shipments are expected to arrive.

Global prices were depressed for last few months, but there has been a spurt in rates in anticipation of the lower crop in Australia. Even domestic rates have started inching up, the data showed.

First shipment of US crude lands in India

NEW DELHI: The US just became India's latest oil supplier, with the first shipment of crude landing in the country. State-owned IndianOil Corporation's purchase of 1.6 million barrels arrived at Paradip, Odisha, on Monday, and was received by US and Indian officials.
The US had stopped oil exports in 1975, a ban lifted by former US President Barack Obama in 2015. MT New Prosperity, a very large crude carrier (VLCC), with a capacity to haul 2 million barrels, had left the US Gulf Coast on August 19. "IOC will process the crude at its refineries at Paradip, Haldia (in West Bengal), Barauni (in Bihar) and Bongaigaon (in Assam)," an IOC statement said. State-owned Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd have also placed orders for about 2.95 million barrels and 1 million barrels of US crude, respectively, for their Kochi and Vizag refineries. "The total volume of the crude contracted by Indian public sector refineries is, therefore, 7.85 million barrels," the statement said.
US officials estimate the present Indian oil buys could increase bilateral trade by almost $2 billion. The US embassy, in its own statement, said, "During their June 26 meeting in Washington, President Trump and Prime Minister Modi committed to expanding and elevating bilateral energy cooperation through a strategic energy partnership."
Indian companies, both public and private, have invested about $5 billion in US shale assets. They have also contracted 5.8 million tonnes per annum of liquefied natural gas from the US and the first shipment is expected to be delivered to India in January 2018. India has encouraged state-controlled refiners to buy US and Canadian crude from the US Gulf Coast as it looks at cheaper alternatives that have emerged due to a global supply glut.
The second shipment is expected in a month's time. India, the world's third-largest oil importer, joins Asian countries like South Korea, Japan and China, which have been buying US crude after production cuts by oil cartel OPEC drove up prices of West Asian heavy-sour crude, or grades with a high sulphur content.
The important fact about US crude imports is that even after the transport costs, the oil is priced competitively compared to Gulf crude, which India has traditionally been buying.

US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in the western world) and Dubai (a benchmark for countries in the east) narrowed. India hopes to chip away at the so-called "Asian premium" charged by West Asian exporters by diversifying its oil buys. While in the first purchase, IOC is importing 1.6 million barrels of high-sulphur crude Mars from the US and 400,000 barrels of Western Canadian Select oil, in the second it has bought 1.9 million barrels from the US, half of it shale oil.
MaryKay Carlson, charge d'affaires at the US embassy, termed the imports a significant milestone in the growing partnership between the US and India. "The US and India are elevating our cooperation in the field of energy, including plans for cleaner fossil fuels, renewables, nuclear, and cutting edge storage and energy efficiency technologies. We look forward to working together on further sales of US crude and exploring opportunities to expand the role of natural gas in India," Carlson said.To encourage US crude purchases, the government has allowed refiners to use a foreign rather than an Indian owned vessel for the purchase. Indian refiners typically have to use domestic vessels for their crude imports. The Indian government has also eased the rules for allowing VLCCs into Indian ports.

Crude Oils Exports Imports