KUALA LUMPUR, January 16 (Reuters) – India’s move to restrict Malaysian palm oil imports will create a great challenge for the world’s second largest producer of edible oil, as India has been its main market for the past five years.
India, the world’s largest buyer of edible oils, restricted imports of refined palm oil last week and effectively halted all purchases of Malaysian palm oil in retaliation for Malaysian Prime Minister’s criticism of India’s policy towards Kashmir .
The Indian government withdrew Kashmir’s autonomy last year to strengthen its control over the region, closed Internet access and arrested activists and politicians. Malaysian Prime Minister Mahathir Mohamad recently said that Hindu majority India was “invading and occupying the country” of Jammu and Kashmir.
India has been the main import market in Malaysia since 2014, according to industry data.
Last year, India bought 4.4 million tons of palm oil from Malaysia, which represents 24% of all Malaysian palm oil exports.
The second largest buyer of palm oil from Malaysia, China, bought only 2.4 million tons last year, while the third largest buyer was Pakistan with 1.08 million tons, according to data from the Palm Oil Council of Malaysia.
Malaysia is talking with the Indian government and trade officials in an attempt to resolve concerns about import restrictions in New Delhi, said Teresa Kok, Malaysian minister in charge of palm oil, on Thursday.
She has pointed to Africa and Central Asia as emerging markets for Malaysian palm oil, and said Malaysia will continue efforts to increase its participation in the Middle East.
But replacing India and getting other countries to buy palm oil from Malaysia may not be easy.
Indonesia, the world’s largest producer of palm oil, has lower production costs and has a greater market share in many palm oil consuming countries. Historically, it has also offered palm oil at cheaper prices than Malaysia, although Malaysian export prices have recently plummeted below Indonesia’s rates as Indian buyers withdrew from the market.
Outstanding industry analyst James Fry said that India’s restrictions will change purchases of Indian raw palm oil from Malaysia to Indonesia, and that Malaysia could end up selling more refined palm oil worldwide.
On Wednesday, Reuters reported that India planned to extend restrictions to Malaysia beyond palm oil, a measure that could further damage Malaysia’s revenues.
India is the seventh largest market for all Malaysian exports, while Malaysia is the 17th largest export market in India.
Malaysian palm oil exports to the main destinations https://tmsnrt.rs/2QYk9Za
Malaysia vs Indonesia palm oil exports to India http://tmsnrt.rs/30qPhDz
Malaysian palm oil prices plummet at a strong discount against Indonesia amid Indian trade disputes.
Indian imports of Malaysian palm oil vs Indonesia https://tmsnrt.rs/2QYA3CI
(Mei Mei Chu report in Kuala Lumpur and Rajendra Jadhav in Mumbai; Edition of Gavin Maguire and Susan Fenton)
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