The edible oil markets are heading into opposite directions as 2017 nears its end. According to the latest weekly report from shipbroker Intermodal, “while the veg-oil market ex South America has been steadily soft for the past two months, the long haul palm oil market from South East Asia has strengthened, reaching new highs for the year. Despite a fair CPP market across the Atlantic basin, freight rates from South America remain subdued. This comes as no surprise, since cargoes quoted so far are scarce and demand for veg oil tonnage limited. Freight rates are still moving sideways and around last done levels at USD low-mid 30s pmt bss 2/2 on min 40,000mt. Moving on to the next year, the general outlook is still rather disquieting”.
Stelios Kollintzas, Specialized Products with Intermodal noted that, “this is not primarily because of market fundamentals though, but mostly due to the weather conditions that are expected to prevail in the beginning of the New Year such as droughts or floods. Indeed, Argentina’s usual extreme weather conditions are likely to hamper its soy and other crops and the prevailing drought in the region is likely to affect the first months of 2018. Looking into the Black Sea market, things have been rather busy lately, with a noticeable increase in sunflower oil export volumes. Such movement along with a firm CPP market is already reflected on a slight rates increase, especially on the bigger parcels over 30,000mt. The ice season is expected to further support this, which is naturally much anticipated by owners”.
Kollintzas added that “evidently, the last two months have been the best period for the long haul palm oil market. Increased demand before entering into the festive period coupled with higher bunker prices enabled Owners to push TC Trip levels up to USD 18,000/day. However, heading towards the end of the year we have seen rates to level off down to about USD 16,000 USD/day. At the moment, the regional palm oil market looks rather challenging. India has been on an import tax spree announcing its second hike on edible imports in just a three month period. The tax for crude palm oil is 30% tax, for refined palm oil at 40%, for crude soy oil at 30% and for refined soy oil at 35%”.
“Obviously, cargo volume has since been considerably decreased along with a consequent decrease on rates, which has nonetheless been rather soft so far on the back of tight tonnage availability and delays of ships in Indian ports. However, while China’s stocks are piling up and buyer’s inevitably holding back on imports, more ships are going to become available at some point. Taking an overall view one could say that they year ahead looks brighter for the west bound palm oil market compared to the regional market. For what it is worth, according to the Malaysian president’s economic report, Malaysian output is forecast to rise to 20.5 million tonnes in 2018 due to better yields and expansion into matured areas. It remains to see how this output will flow”, Inermodal’s analyst concluded.
Source: Hellenic Shipping News.