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GLOBOIL INDIA 2013 September 20-22, 2012 Renaissance Mumbai Hotel & Convention Center, Powai, Mumbai, India. “Emerging Trends in the Edible Oil Sector In the Asia Pacific Region” A view from Pakistan By Abdul Rasheed Janmohammed Director - Westbury Group of Companies
EDIBLE OIL SCENARIO • Per Capita Consumption : 15 kgs. • Total Consumption : Around 3.3 Million Tons. • Local Production :0.7-0.8 Million Tons. • Import of Edible Oils :1.9 – 2.0 Million Tons. • Oil Extracted from Imported Seeds : Around 0.4 Million Tons. • Total Import Bill of Edible Oil about US$ 1.8 to 2.0 Billion. • Total Import Bill of Oilseeds about US$ 0.5 to 0.6 Billion.
The PTA with Indonesia has now been effective from 1st September 2013. Hence, both the origins i.e. Malaysia and Indonesia have same duty structure for import into Pakistan. N.B. Point to note that in India, the import duty on Crude Palm Oil is only 2.5% and 7.5% on Refined Palm Products. This shows that Government not only wants to avoid burden on common man but also encourage local Refining of Palm Oil which is a value added Industry.
Since there is heavy duty structure and taxes on the import of Edible Oils in Pakistan, I am taking the liberty of quoting the following quotes: • Everyone wants to live at the expense of the state. • They forget that the state wants to live at the expense of everyone. • Frederic Bastiat “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Winston Churchill
Since the time Indonesia have revisited their Export Tariff, Indonesian origin have become very competitive particularly for the Import of RBDPO. This is being reflected in the above Tables as in the year 2011, Indonesian share of Export of RBDPO to Pakistan was only 39% which was increased to 63% in the year 2012 and upto August 2013, it has further increased to 75% . While the Indonesian Palm Oil was already having edge over Malaysia, we believe that after the execution of PTA, the Indonesian share may further increase.
Above Table will reflect that import of CPO into Pakistan is gradually coming down and presently it is completely stopped. The main reason is the Export Duty imposed by the Government of Indonesia and Malaysia for exporting CPO. This export duty structure has shut down all the Refineries in Pakistan. With the present import duty structure of CPO and Export Duty structure at the origin, Pakistan Refineries cannot import any CPO. Presently we have Ten Refineries having capacity of 5,500 M.Tons per day. The additional Six Refineries are under construction. The sudden imposition of Export Duty is not only creating the huge obstacles for the Refining Industry but a great loss as well. We have already represented the matter with the Malaysian Government as well as to Malaysian Palm Oil Board (MPOB) and awaiting their consideration.
In addition to above arrivals, we understand following cargoes have been booked by Pakistan: • Rapeseed Around 50,000 MT • Sunflower Seed Around 250,000 MT
Since I am now embarking on giving the Market Facts, I would like to start again with a small quotation: “I never assume anything. I anticipate the possibilities and allow my imagination to create the future.” Lionel Suggs
MARKET FACTS • Let us see where the Market could head on the basis of following facts: • 1. Malaysian Palm Production expected to be 18.9 (M) tons in 2013 against 18.8(M) tons in 2012 • 2. Indonesian Palm Production expected to be around 28.0 (M) tons in 2013 against around 26.0(M) tons in 2012. (It is bit difficult to be exact on the Indonesian numbers). • 3. US Soyabean Crop expected to be 85.7 (M) Tons in 2013 against 82.1(M) Tons in 2012. • 4. Argentina New SoyabeanCrop is expected to be 49.1 (M) Tons in 2013 against 39.4 (M) Tons 2012 and 54 (M) Tons expected for 2014, i.e. upcoming harvest next year. • 5. Brazilian Soyabean Crop is expected to be 81.5 (M) Tons in 2013 against 66.6 (M) Tons 2012 and 84 (M) Tons expected next year. • Malaysian Stocks of Palm Oil for August 2013 were 1.665 (M) Tons. • In 2011-12 (Nov-Oct) India imported around 10 million tonnes of edible oil and during 2012-13 ending October, India would be importing about 10.5 / 10.7 million tonnes.
The year 2013 has been a dull year as far as trading of Palm Oil is concerned. The lowest we have seen on MDEX was 2133 on 30th July 2013 and the highest we have seen was 2593 on 31st January 2013 i.e. the variation of 21.5% during Jan-July. Most of the time the prices remain under pressure due to various factors. This year the most vulnerable factor was the volatility in the currencies. Practically all currencies against Dollar depreciated including Malaysia, Pakistan and India. Everyone is aware that during Sept/Oct Palm Production will go up and it will be in double digit which will ultimately increase the stock level which may put some pressure on the prices. The overall market is indeed supply driven rather than demand driven. 10. The Sunseed crop is huge this year which has penetrated in the market and put the other seeds and soft oil on the back foot. 11. Brent Crude oil has performed well inspite of various odds and since the winter season is approaching one should not be too bearish on Brent Crude oil prices. The US / Syria conflict did inflate the prices, however, the World is not ready for another adventure by the US. Hence the prices have retreat. Nevertheless, I feel Brent Crude Oil prices will not go below US$ 100 per barrel. 12. Markets as usual are reacting on diversified forces like Funds, Fundamentals, Currencies and Political Situation.
Before I submit my humble forecast to justify the hospitality of Globoil, I must quote that : • Follow your instincts. That’s where true wisdom manifests itself. Oprah Winfrey
From the above scenario, I think Palm is still the cheapest oil in the World. Although there is a potential of prices correcting down wards due to increase in production in the coming months, the palm prices are already in the lower bracket. I therefore believe that room for the prices to go further down should be limited. Taking into account the Global Economic situation more particularly related to currencies, it is my assessment that: Palm may not go below RM 2200. I feel that during the last quarter of 2013, it may range between RM 2200-2400.
I would like to conclude my Presentation with a famous quote : Try not to become a man of success, but rather try to become a man of value. Albert Einstein