Indonesia to India shipping enquiries for crude palm oil fall

07 January 2011 10:54  [Source: ICIS news]

SINGAPORE (ICIS)--Competition between vessel owners for spot palm oil from southeast Asia to India is heating up due to a shortage of crude palm oil (CPO) exports from Indonesia, industry sources said on Friday.

The shortage of CPO cargoes was due to a recent move by the Indonesian government to implement a 20% export tax to avert a shortage of the material in the domestic market, they said.

Cooking oil was also short due to a spike in buying by the Chinese market in December ahead of the Lunar New Year holidays, which will fall in February.

“We are seeing lesser CPO shipping enquiries loading from Indonesia after the 20% export tax came into effect,” said a vessel owner based in Jakarta.

Vessel owners operating between the Middle East and northeast Asia routes typically book 8,000-12,000 tonnes of base oils or acids from South Korea to India and balance the space offered to charterers with smaller requirements of 1,000-5,000 tonnes of chemicals.

In the absence of larger volumes from northeast Asia, the owners will book interim cargoes from China, South Korea or Japan to southeast Asia or perform short runs of fuel oil in southeast Asia.

For owners without contract of affreightment (COA) cargoes from southeast Asia to the Middle East and India, CPO remains a viable option due to the volumes available. Palm oil is normally shipped in volumes of around 8,000-19,000 tonnes to the west coast of India.

The shortage of Indonesia-origin crude palm oil is expected to create stiff competition for Malaysia-origin palm oil, which may lead to freights taking a beating.

Current freights for 10,000 tonnes crude palm oil from east Malaysia to the west coast of India are around $26-27/tonne (€20-21/tonne) as compared with last year’s lowest level of $20-21/tonne, according to industry sources.

Vessel owners, however, are cautious about plunging freights in light of high bunker fuel prices.

“We are monitoring the market and may keep vessel[s] employed in southeast Asia until the situation improves,” said a vessel owner.

Additional reporting by Serena Seng

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By: Lester Teo

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